Posts Tagged ‘WOTC’

Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans

Tuesday, November 13th, 2012

Tax CreditsSource:  IRS.gov

The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC). The Act added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer’s share of social security tax. The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013.

The credit can be as high as $9,600 per qualified veteran for for-profit employers or up to $6,240 for qualified tax-exempt organizations, but the amount of the credit will also depend on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. The amount of the credit for qualified tax-exempt organizations may not exceed the organization’s employer social security tax for the period for which the credit is claimed.

Pre-screening and Certification

All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. The process for certifying the veterans for this credit is the same for all employers.

Normally, an eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after the eligible worker begins work. But under a special rule included in IRS Notice 2012-13, employers have until June 19, 2012, to complete and file this newly-revised form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.

Notice 2012-13 also provides additional guidance on submission of Form 8850.

For more information, see Form 8850 , Pre-Screening Notice and Certification Request and the instructions.

Claiming the Credit

For-profit Employers

For for-profit employers, the law now allows a tax credit for hiring qualified veterans who begin work before January 1, 2013.

After the required certification is secured, for-profit employers claim the tax credit as a general business credit against their income tax. The process for for-profit employers claiming the Work Opportunity Tax Credit under the VOW to Hire Heroes Act for qualified veterans remains the same.
For additional information, see:

Tax-exempt Employers

Qualified tax-exempt organizations, organizations described in IRC Section 501(c) and exempt from taxation under IRC Section 501(a), may claim the credit for qualified veterans who begin work on or after Nov. 22, 2011, and before January 1, 2013.

After the required certification is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C , Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. It is recommended that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit as the forms are processed separately.

In addition to Form 5884-C and its instructions, tax-exempt employers should see IRS Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit.

References/Related Topics:

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Work Opportunity Tax Credit Overview

Sunday, February 27th, 2011

Work Opportunity Tax CreditThe Work Opportunity Tax Credit (WOTC) is a federal tax credit available to all private sector businesses as an incentive to employers to hire workers in certain groups who consistently experience high rates of unemployment. The Work Opportunity Tax Credit reduces an employer’s cost of doing business and requires little paperwork.

The tax credit allows employers to reduce their federal tax liability by up to $9,000 per new hire. For-profit businesses of any size qualify. And the tax credit applies to temporary, seasonal, part-time and full-time workers. The tax credit is available for new hires with job start dates through December 31, 2011.

The WOTC applies only to new employees who have never worked for the hiring employer at any other time.

  • Any size for-profit employer may apply for the WOTC.
  • No limit to the number of new hires an employer may claim for the WOTC in any calendar year.
  • No relatives or dependents or majority business owners qualify as WOTC hires.
  • Self-employed individuals do not qualify as WOTC hires.
  • Temporary, seasonal, part-time and full-time work applies.
  • Any type of job is acceptable.
  • There is no limit to the number of new hires that can qualify an employer for the WOTC in any calendar year and the amount of tax credit an employer can accrue.
  • If your company is not profitable this year, the credits are good for up to 3 years from the due date of your return.

Certification of the Employee

An employer must request and receive certification from its state workforce agency (SWA) that the new hire is a member of one of the WOTC target groups before the employer can claim the WOTC on its federal income tax return. To request certification, the employer must:

  • Complete page 1 of IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, by the date of the job offer and page 2 of IRS Form 8850 after the individual is hired; and
  • Complete one of the following one-page U.S. Department of Labor forms, as appropriate:
    • ETA Form 9061, Individual Characteristics Form, if the new hire has not been given a conditional certification, ETA Form 9062, or
    • ETA Form 9062, Conditional Certification Form, if provided to the job seeker by a participating agency, such as a vocational rehabilitation agency, an employment network, or a SWA; and Mail the signed/dated IRS and ETA forms to the state workforce agency’s WOTC Coordinator not later than 28 days after the new hire begins work.

To learn more about the WOTC, call your State WOTC Coordinator, visit the WOTC website or call your local employment or state workforce agency.  To find the State WOTC Coordinators, click here.

National Coordinator
Carmen Ortiz
Washington, D.C.
202-693-2786
ortiz.carmen@dol.gov

Submitted By:

Jean Austin, SPHR
Manager of HR Services
Payroll Control Systems
Office: 763-746-1942
Cell: 612-770-6187
jaustin@pcspayroll.com
www.pcspayroll.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Tax Credits Provide Relief for U.S. Businesses

Sunday, October 31st, 2010

TaxBreak Tax CreditsBy:   Shannon Scott, President, TaxBreak-National Tax Credit

Most of you have heard the term “tax credit”, but did you know it can decrease your tax burden and put more cash back into your business?  Each year large and small companies forfeit millions of dollars because they do not take advantage of the tax credits available to qualifying employers. Many of these credits go unclaimed due to the complexity and time-consuming factors that impact the process.  There are many types of tax credits available to your company on the Federal, State and local level.  For the restaurant industry, the federal hiring credits such as the Work Opportunity Tax Credit (WOTC), Empowerment Zone (EZ) and Renewal Community (RC) credits can result in huge dividends.  These credits are available by simply doing what you do every day; hiring employees.

These tax credits can provide up to $9,000 per employee in Federal Income Tax Credits based on the category for which the employee qualifies.  These credits can be taken in the year earned, carried back one year or carried forward 20 years.  The WOTC rewards employers hiring individuals who are members of targeted economic groups while the EZ and RC are zone based credits.  To qualify for a zone credit, an employee simply has to live and work in one of the 81 designated zones in the United States.  Most companies believe they are taking advantage of this program through their regular tax deductions; however, that is simply not the case.  If your new hires are not completing and signing an IRS Form 8850 upon hire, you are not processing these tax credits.

These programs, although very beneficial, can be almost impossible to administer in house.  Processing and qualifying these credits takes a very good understanding of how tax incentives are applicable to a particular industry, location or employee base.  In some cases, extensive background and address history research must take place in order to verify these credits.  Tax credit processing companies throughout the United States assist you in identifying these credits and calculating the amount for which an employee qualifies.  Most of these companies work on a contingency fee basis, so there is no financial risk to your company and the fees are tax deductible.

Taking a proactive approach in identifying these credits can significantly increase your tax credit yield.   The application process will help you screen your new hires and identify their tax credit potential.  After all, this program was put in place to encourage you to hire these employees.

Recent tax law changes have increased the use of these credits to businesses who could previously not take advantage of the incentives along with extending the program itself.  The WOTC credit was extended for 3.5 years with liberalized rules for hiring disabled veterans and workers in “outward migration counties.”  Under the pre-2007 Small Business Act law, most general business credits, such as WOTC, could not offset a taxpayer’s Alternative Minimum Tax (AMT) liability.  With the enactment of the 2007 Small Business Act, this changed for credits earned after January 1, 2007.  The WOTC credits earned after January 1, 2007 offset AMT.  A taxpayer is subject to AMT whenever their tentative minimum tax exceeds their regular tax.

There are many good resources available for learning more about the types of credits and how these credits can help reduce your tax burden.  Information can be found on most search engines along with the IRS Website (www.irs.gov).  Tax time is fast approaching and it is not too late to help reduce your 2010 tax liability.

For more information:

Call George Shamblin gshamblin@taxbreakllc.com or Todd Griffin email tgriffin@taxbreakllc.com

866-499-6355
www.taxbreakllc.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

The Tax Man Cometh

Monday, August 30th, 2010

Tax CreditsSubmitted By Shannon Scott

Most of you have heard the term “tax credit”, but did you know how it can decrease your tax burden and put more cash back into your business? Each year large and small companies forfeit millions of dollars because they do not take advantage of the tax credits available to qualifying employers. Many of these credits go unclaimed due to the complexity and time consuming factors that impact the process. There are many types of tax credits available to your company on the Federal, State and local level. For the staffing industry, the federal hiring credits such as the Work Opportunity Tax Credit (WOTC), HIRE Act credits and FICA Tip Tax Credit can result in huge dividends. These credits are available by simply doing what you do every day; hiring and placing employees.

These tax credits can provide up to $9,000 per employee in Federal Income Tax Credits based on the category for which the employee qualifies. These credits can be taken in the year earned, carried back one year or carried forward 20 years.  They can be demographic or geographic in nature.

Most companies believe they are taking advantage of this program through their regular tax deductions, however, that is simply not the case.  If your new hires are not completing and signing an IRS Form 8850 upon hire, you are not processing these tax credits.

This program, although very beneficial, can be almost impossible to administer in house. Processing and qualifying these credits takes a very good understanding of how tax incentives are applicable to a particular industry, location or employee base. In some cases, extensive background and address history research must take place in order to verify these credits.  Tax credit processing companies throughout the United States assist you in identifying these credits and calculating the amount for which an employee qualifies. Most of these companies work on a contingency fee basis, so there is no financial risk to your company and the fees are tax deductible.

Taking a proactive approach in identifying these credits can significantly increase your tax credit yield.  The application process will help you screen your new hires and identify their tax credit potential. After all, this program was put in place to encourage you to hire these employees.

Recent tax law changes have increased the use of these credits to businesses who could previously not take advantage of the incentives along with extending the program itself. The WOTC credit was extended for 3.5 years with liberalized rules for hiring disabled veterans and workers in “outward migration counties.” Under the pre-2007 Small Business Act law, most general business credits, such as the work opportunity tax, could not offset a taxpayer’s Alternative Minimum Tax (AMT) liability. With the enactment of the 2007 Small Business Act, this changed for credits earned after January 1, 2007.  The WOTC credits earned after January 1, 2007, will now offset AMT. A taxpayer is subject to AMT whenever their tentative minimum tax exceeds their regular tax.

There are many good resources available for learning more about the types of credits and how these credits can help reduce your tax burden. Information can be found on most search engines along with the IRS Website (www.irs.gov).  Tax time is fast approaching and it is not too late to help reduce your 2007 tax liability.

-Shannon Scott is the CEO & President of TaxBreak

Please contact George Shamblin at gshamblin@taxbreakllc.com for questions about the tax credit program available through PCS via TaxBreak.

George Shamblin
Corporate Account Executive
TaxBreak
2010 Club Drive, Ste. 100
Gadsden, AL 35901
205.305.7968 Cell
256.549.7554 Fax
www.nationaltaxcredit.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.