A number of federal tax credits have been extended under the COVID-related Tax Relief Act of 2020 and Taxpayer Certainty and Disaster Tax Relief Act of 2020, as included in the Consolidated Appropriations Act, 2021. During a time when many businesses have been financially impacted due to COVID-19, employment tax credits could help offset the tax liabilities imposed on those businesses. We outline those opportunities below.
Work Opportunity Tax Credit (WOTC)
This is an income tax credit worth $2,400 to $9,600 per new hire receiving certain types of government assistance prior to employment. An extension was granted through December 31, 2025. Learn more.
Employee Retention Tax Credit
This payroll tax credit is available to qualifying employers who had a full or partial suspension of operations or a reduction in gross receipts. The credit amount varies depending on the calendar quarter in which the business qualifies. An extension was granted through June 30, 2021. Learn more.
This is an income tax credit worth up to $3,000 annually per employee whose registered home address and location of employment are both within a federal empowerment zone. An extension was granted through December 31, 2025.
Employer Tax Credit for Paid Family and Medical Leave
This income tax credit is available for employers who provide a voluntary paid leave benefit to employees that is separate from state-mandated programs. The amount of the credit varies depending on the rate of pay the employer provides during leave. An extension was granted through December 31, 2025.
Learn more about the credit.
Disaster Retention Credit
This is an income tax credit available to employers whose trade or business became inoperable and they are located in a qualifying presidentially-declared major disaster area, unless the disaster is solely related to COVID-19. The credit is worth up to $2,400 per employee retained and paid during the recovery period. While the credit has been offered previously for certain other natural disasters, a new provision in the credit allows for tax-exempt employers to claim the credit against their payroll taxes. The credit is applicable to a major disaster declared on or after January 1, 2020, and no later than February 25, 2021, as long as the incident period for the disaster began on or after December 29, 2019, and before December 27, 2020.
Learn more about the credit.
Indian Employment Credit
This is an income tax credit worth up to $4,000 per qualified employee, annually, for employing individuals who are registered members of an Indian Tribe and live and work on or near a reservation. An extension will be granted through December 31, 2021.
We’re Here to Help
For more information or help determining if your business qualifies for the tax credits, contact your Moss Adams professional.