The federal government and a number of states allow businesses to claim tax credits for hiring members of targeted groups and for conducting business in specifically designated areas. There are a few hiring and zone-based tax credits that can be particularly valuable to a wide range of businesses.
The WOTC—a federal credit distributed at the state level—is designed to encourage businesses to hire individuals receiving government assistance to enable them to become more self-sufficient. Depending on which target group the individual belongs to, the maximum credit per new hire can range from $2,400 to $9,600. Target groups include:
The value of the credit is determined by the target group the employee qualifies under, the number of hours worked, and the wages earned in the period of employment. It must be applied for within 28 days of a new hire’s start date.
This federal credit provides businesses with an incentive to hire individuals who live and work in a federally designated empowerment zone. The credit is equal to 20 percent of the first $15,000 in wages earned in a taxable year if the employee both lives and works in an empowerment zone. Businesses can retroactively claim this credit if they haven’t taken it previously on their federal income tax return, subject to the statute of limitations.
Many states offer their own WOTC-equivalent opportunities. The amount of credit and the type of tax they offset varies by state. For example:
Other states offer similar hiring credit opportunities that may require more specific qualifications. We can assess your company's qualifications and navigate the process of claiming these and other credits.
Both the WOTC and the empowerment zone tax credit offer valuable opportunities to boost your business's cash flow. Leveraging these credits used to be a time-consuming process that posed an administrative burden for many companies. Not anymore.
MaxCredits, an industry-leading Web-based tool from Moss Adams, vastly simplifies and streamlines the process. With MaxCredits, new hires enter relevant personal information via a secure Web site and answer a short set of questions to determine whether they qualify your business for federal or certain state wage-based income tax credits or incentives.
Businesses qualifying for tax credits use the IRS-approved DocuSign® Digital Transaction Management platform to electronically apply for relevant credits—removing paper from the process to drive enhanced security and increase compliance. Employers also save additional time and money by screening for other federal and certain state credits simultaneously. A process that used to take up to three weeks can now be accomplished in one day.
Contact us to learn more about MaxCredits and discover how it can benefit your business.
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