In late December, President Obama formalized the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). Among the many taxpayer-friendly provisions in that act was the retroactive extension of the Work Opportunity Tax Credit (WOTC) program through December 31, 2019. The WOTC is designed to provide credits to taxpayers who hire members of one of the following target groups:
In order to qualify for the WOTC, taxpayers must undergo a relatively regimented pre-screening and certification process, the first step of which is the filing of Form 8850 – Pre-Screening Notice and Certification Request – with their respective state workforce agencies within 28 days of the date the target group member begins work. Unfortunately, due to the retroactive nature of the WOTC extension, there could be several recent hires that would qualify for the credit that now have delinquent paperwork. Never fear. The IRS has issued guidance that provides employers additional time beyond the 28-day deadline for submitting Form 8850. An employer will be considered having timely submitted Form 8850 as follows:
The certification process can be time-consuming, particularly considering the backlog of certifications that is likely to arise due to these transitional provisions. It is imperative that the employer receives the certification before claiming the credit.
Empowerment Zone Employment Credit
Also available for 2015 and 2016 is the Empowerment Zone Employment Credit. This credit is calculated by taking 20% of wages paid by employers to a qualified full-time or part-time employee. The credit is limited to the first $15,000 of wages for 2015. Qualifying employees are those who meet both of the following criteria:
As noted above, the employee must both live and work in an empowerment zone, so this credit is not as broadly applicable as the WOTC; however, there are several empowerment zones in both rural and urban areas, so opportunities are out there.
There are other, more strategically focused incentives and credits out there offered by the IRS. Various states also afford opportunities for credits and incentives for hiring employees who meet certain criteria. Some states provide a wide range of incentives—from grants to help cover training/retraining expenses to tax liability offsets. If your business has recently hired new employees, or plans additional hires in the coming months, make sure you are not leaving money on the table. Contact one of our executives below, (800) 270-9629, to discuss your alternatives.