A Guide to Hiring Credits

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What Are Hiring/Employment Credits?

Hiring and employment credits are tax credits that exist in order to incentivize the hiring of employees of a specific demographic and/or in a particular location to encourage economic growth through increased employment, new technology, and improved civic infrastructure.

Some of the most popular hiring and employment credits include:

The Work Opportunity Tax Credit – Provides a federal credit of up to $9,600 (per eligible employee) for employers who hire individuals who qualify as members of target groups. There is no cap on the number of eligible people for which a business may claim this credit. The target groups include people who typically face high barriers to entry in the workforce, including:

  • Veterans
  • Temporary Assistance for Needy Family (TANF) Recipients
  • Supplemental Nutrition Assistance Program (SNAP) Recipients
  • Designated Community Residents, including Residents of Empowerment Zones or Rural Renewal Counties
  • Vocational Rehabilitation Referrals
  • Ex-Felons
  • Supplemental Security Income (SSI) Recipients
  • Summer Youth Employees
  • Long-Term Unemployed

The Payroll Tax Credit – An extension of the tax credit for research and development, this credit allows “qualified small businesses” that are performing “qualified research” to offset up to $250,000 of the employer portion of FICA payroll tax.

Federal Empowerment Zone Tax Credits – A credits for hiring and retaining employees who live and work within designated distressed communities. Business that qualify can earn up to $3,000 per eligible employee.

Assorted State Hiring Tax Credits – Most states offer a variety of credits with the goal of incentivizing job creation and bolstering the local economy. Visit your state’s Department of Revenue website or consult your tax advisor for more information.

Who Can Use Hiring Credits?

Each credit comes with its own specific criteria. Some require that employees belong to a particular demographic, while others have requirements pertaining to where an employee lives or works. Private companies, C Corporations, S Corporations, LLC’s, and 501(c)’s all qualify for a variety of federal and/or state hiring and employee tax credits.

What Are the Benefits of Hiring Credits?

When a business files their taxes, the total amount of any tax credits for which they file is subtracted from their tax liability, thereby reducing their total tax burden. Money saved can be used for a variety of purposes, such as to offset costs for recruiting, onboarding, and training new employees, or for investment back into the business.

These tax credits are important for their contributions to the local and national economy. They encourage business owners and managers to hire workers who often face significant barriers to employment. They contribute to greater diversity in the workplace. Lastly, they help raise the employment rate, which means more workers can move towards self-sufficiency and become contributing taxpayers themselves.

WNDE Hiring Credits Services

WNDE’s team of tax professionals are thoroughly versed on the most up-to-date versions of both federal and state tax credits available in California. Reach out to one of our advisors today for more information or if you have any questions.

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