| |
Work Opportunity Tax Credit Available to Employers
Employers may qualify for a tax
credit known as the work opportunity tax credit
that
is worth as much as $2,400 for each eligible
employee ($4,800 for certain veterans and $9,000 for
employees who are “long-term family assistance
recipients”). The credit is generally limited to
eligible employees who begin work for the employer
before Sept. 1, 2011. The credit is available on an
elective basis for employers hiring individuals from
one or more of ten targeted groups. The amount of
the credit available to an employer is determined by
the amount of qualified wages paid by the employer.
Generally, qualified wages consist of wages
attributable to service rendered by a member of a
targeted group during the one-year period beginning
with the day the individual begins work for the
employer (two years in the case of an individual in
the long-term family assistance recipient category).
An employer is eligible for
the credit only for qualified wages paid to members of a
targeted group. These groups are: (1) qualified members
of families receiving assistance under the Temporary
Assistance for Needy Families (TANF) program, (2)
qualified veterans, (3) qualified ex-felons, (4)
designated community residents, (5) vocational
rehabilitation referrals, (6) qualified summer youth
employees, (7) qualified members of families receiving
Food Stamp assistance, (8) qualified Supplemental
Security Income recipients, (9) long-term family
assistance recipients, and (10) certain unemployed
veterans or disconnected youth who begin work for the
employer during 2009 or 2010.
For each employee, there is also a
minimum requirement that the employee has completed at
least 120 hours of service for the employer.
Also, the credit isn't available for certain
employees who are related to the employer or work more
than 50% of the time outside of a trade or business of
the employer (e.g., working as a maid in the employer's
home).
Additionally, the credit generally isn't
available for employees who have previously worked for
the employer.
For employees other than summer youth
employees, the credit amount is determined under the
following rules. The employer can take into account up
to $6,000 ($10,000 for each employee who is a “long-term
family assistance recipient”; $12,000 for certain
veterans) of first year wages per employee. If the
employee has completed at least 120 hours but less than
400 hours of service for the employer, the wages taken
into account are multiplied by 25%. If the employee has
completed 400 or more hours, all of the wages taken into
account are multiplied by 40%. Thus, under the above
rules, the maximum credit available is $2,400 ($6,000 ×
40%) per employee ($4,800 for certain veterans; $4,000
for a “long-term family assistance recipient,” for whom
a 50% credit for up to $10,000 of second-year wages is
also available). The “first year” referred to above is
the year-long period which begins with the employee's
first day of work.
For summer youth employees, the rules
in the preceding paragraph apply, except that the
employer can only take into account up to $3,000 of
wages, and the wages must be paid for services performed
during any 90-day period between May 1 and Sept. 15.
Thus, for summer youth employees, the maximum credit
available is $1,200 ($3,000 × 40%) per employee.
You should be aware that (1) no
deduction is allowed for the portion of wages equal to
the amount of the work opportunity credit determined for
the tax year, (2) wages taken into account for the work
opportunity credit can't be taken into account for (and
reduce the limit on the amount of wages that can be
taken into account for) the empowerment zone employment
credit or the renewal community employment credit and
(3) the credit is subject to the overall limitations on
the amount of business credits that can be taken in any
tax year, but a 1-year carryback and 20-year
carryforward of unused business credits is allowed.
Because of these three rules, there may be circumstances
in which the employer might, under an available
election, elect not to have the work opportunity credit
apply.
There are some additional
rules that, in limited circumstances, prohibit the
credit or require an allocation of the credit. We
suggest contacting your tax advisor for the application
of these rules in your specific circumstances.
For a free quote on payroll services
click here or call us at
815-788-2932
|
Simple.
Convenient. Smart.
Complete Payroll, Inc.
380 N. Terra Cotta Rd
Suite D
Crystal Lake, IL 60012
815.788.2932
|
