As the tax season nears and business conditions begin to improve, now may be the time to benefit from the tax credits offered to those hiring individuals from certain groups. Below, we take a look at these credits.
The Work Opportunity Tax Credit – Generally up to $2,400
This tax credit is issued to employers that hire individuals unable to gain employment because of significant barriers (i.e. being disabled). Generally, the tax credit is 40% of the 1st $6,000 in 1st yr wages or $2,400.
Tax Credits Are Higher For Certain Individuals – Up to $9,000
Disable Veterans Credit is up to $4,800
Long-term Family Assistance Recipient is up to $9,000 if hired over 2 yrs
Individuals That Qualify For the Tax Credit
Qualify for Temporary Assistance For Needy Families (TANF)
Veterans
Unemployed/Disabled Veterans
Ex-Felons
Designated Community Residents
Supplemental Security Income Recipient
Long Term Family Assistance Recipient
Vocational Rehabilitation Recipient
Katrina Victims
Food Stamp Recipients
Disconnected Youths
Summer Youth Employees
Factors to Consider Before Applying For the Tax Credit
Work Productivity May Fall
It is important to understand the relationship between the risk of lower worker productivity vs. the reward from the tax benefit. A job that requires a highly specialized skill-set may have a less favorable risk/reward relationship than say a job as a factory worker.
Minimum Employment Period
Do your homework and check that the prospective employee is well suited for the position. There is a minimum employment period of 400 hours to claim the tax credit. If you want to claim the partial credit (25%), the employee would have to work 120 hours.
Additional Training Cost
Some of these prospective employees may not be completely trained for the position and may need more training than normal. Be sure to factor this cost into your decision.
Work Environment Modifications
The work environment/setting may need to be modified to accommodate this prospective employee.
Process to Apply
Approval Forms
Complete the IRS Pre-screening 8850 Form & the US Department of Labor Form 9061 before hire date
Tax Credit Forms
Complete Form 5884
Other Hiring Tax Benefits Available to Biz Owners
Disabled Access Credit – For businesses that are made accessible to disabled employees. The annual credit is 50% of costs above $250 but not less than $10,250, for a total credit of $5,000. Use Form 8826 to claim the credit.
Architectural & Transportation Credit – For businesses that remove physical, structural, and transportation barriers for disabled workers. Business can deduct up to $15,000 annually.
