Every year, most Government tax credits go unclaimed because the Employer does not have the time nor the expertise to obtain them. That is because Accountants do not have the time or expertise to interview the new hires of these businesses and file the necessary paperwork with the designated State Employment Agency. And, because the Employer must go through the tedious process of finding out if the New Employees they hire are eligible for these tax credits, coupled with the fact that the Government requires that their process must be completed within 28 days of when the new Employee was hired, most tax credits go unclaimed. It is a monumental hassle for any Employer.
The good news is that there are organizations that have dedicated themselves to perform these services strictly on a performance-based shared benefit basis only when they are successful in getting a tax credit for the Employer as their authorized advocate, in which case the Employer pays them a portion of the tax credit they receive after the tax credit has been awarded by the IRS. And, to do that, have integrated their services with the Employer onboarding process thereby removing the Employer entirely from having to deal with the hassle of interviewing new hires to determine their eligibility which requires a pre-screening process that needs to be documented by IRS Form 8850 which must be filed with the State Workforce Agency (SWA) to certify a new hire qualifies for a tax credit. Once those certifications have been attained, IRS Form 5884 needs to be filed to claim the tax credits. In other words, the process becomes automated to the point that allows these contingency fee organizations to do all the work for the Employer from the Employee interview, certification, and Government filing process to maximize the tax credits that benefit businesses who hire a great deal of Employees per year, such as Staffing Companies, Professional Employer Organizations (PEO’s) and any mid-size or large business.
The most well-known of these New Employee Hiring Tax Credits is called the Work Opportunity Tax Credit (WOTC) which currently is funded through December 31, 2025.
Employer Tax Credits can also be emanated from the Protecting Americans Against Tax Hike legislation of 2015. And, Employees who are hired who live within geographically zip-coded addresses qualify for Enterprise Zone, Empowerment Zone, and Rural Renewal Community tax credits. Finally, identifying qualified Veterans who would qualify for tax credits under the Vow To Hire Hero Act. With this plethora of great tax credits, Eligibility for these tax credits is based on Employees who work 120-399 hours in their first year of employment qualify for a partial tax credit. Employees who work 400 hours or more during their first year of employment qualify for a maximum tax credit.
The new hire tax credits that can be obtained first include the Work Opportunity Tax Credit (WOTC). To be eligible for WOTC a new hire needs to qualify in any of the following categories: Qualified Veterans, SNAP (Food Stamp) Recipients, TANF (Temporary Assistance For Needy Families) Recipients, Ex-Felons, Designated Community Residents (Individuals 18-40 who have been certified by the local Government Employment Authority that they reside in a Zone eligible for Tax Credits), Vocational Rehabilitation Referrals (Individuals the Government has established have either a mental or physical disability), Summer Youth Employees, SSI Recipients (Individuals who receive Supplemental Security Income from the Government because of age, blindness, or a disability), Long Term Unemployed (Individuals who have been searching for a job for 27 weeks or longer).
The next set of tax credits that a new hire may be eligible is based on incentives that the Government provides businesses that operate in economically distressed geographic Cities throughout the United States. These include Enterprise Zone, Empowerment Zone, and Rural Renewal Community tax credits. You can generally identify whether or not your business is within one of these locales by searching on the Internet where you specifically put in the words “Enterprise Zone Tax Credits”. For example, if you were located in the State of Georgia, you would put in “Enterprise Zone Tax Credits in the State Of Georgia”. Finally, the Hire Hero’s Act is a tax credit that incentivizes both businesses and non-profit organizations alike when they hire certain qualified Veterans.
The bottom line is that most businesses have no idea that these tax credits exist in the first place.
Whether or not businesses decide to obtain them on their own or not is up to them. They now have the option to retain the services of experts who can help them completely automate the process which frees them to run their business.
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