If You’re Hiring, Don’t Miss These Income Tax Savings

Posted on May 31, 2016

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Income Tax Savings for Certain Circumstances

income tax savingsOnboarding a new employee can be an expensive process. Between training, orientation and setting up the employee on a variety of benefits, the hiring of a new team member can take up your time and resources. Keep in mind, though, that if you hire members of certain groups, you may be eligible for a tax credit. Income tax savings may not completely offset your hiring costs, but they are worth capturing.

Once you’ve identified your ideal candidate for the job and made them an offer, take a minute to examine the potential income tax savings for hiring certain employees:

Work Opportunity Credit: There are credits available for hiring members of certain groups. The amount of the income tax savings varies depending on the group, but you should certainly check with your accountant if you hire someone that fits one of the following descriptions:

  • Ex-felons
  • Veterans to meet certain requirements
  • Recipients of SNAP (food stamps)
  • Recipients of Temporary Assistance for Needy Families
  • Designated community residents
  • Individuals referred from vocational rehabilitation
  • Supplemental Security Income recipients
  • Summer youth employees
  • Candidates that have been unemployed for at least 27 weeks

In order to claim the credit, you must fill out a Form 8850 and submit it to the IRS for approval within 28 days of hiring your employee.

Indian Employment Credit: This credit is for companies that do business on an Indian Reservation and hire a Native American that lives on or near the reservation and is a member of the tribe. The credit is 20 percent of excess qualified wages and qualified health insurance costs paid during the calendar year. The total cannot exceed $20,000.

Empowerment Zone Credit: This credit is for businesses that hire within an empowerment zone, designated as a distressed economic area. The credit is applicable for any employee that works part- or full-time in a business located in an empowerment zone.

Research and Development Credit: If your company is engaged in research and development, you can claim a credit to offset your hiring and wage expenses. It used to be that companies had to be profitable to claim this credit, but now any business that meets R&D requirements can receive the credit.

State Income Tax Credit: It’s worth your time to look into employment credits offered by your state. Your state may have specific work opportunity credits or empowerment zone credits that can help you recapture some of your hiring and wage costs.

If you need help navigating the various income tax savings that your company may be eligible to receive, call on Bert Doerhoff, CPA, and the specialists at AccuBiz. Taking advantage of the credits that serve to give businesses a boost can make a significant difference in your bottom line.

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Posted in: IRS, Small Business