Not Only Can You Claim Deductions for Your Employee’s Pay, But There Are Credits Too!

In the last three posts, we discussed the tests and the types of pay that Laura can deduct for her employees.  There are credits that she can take regarding employee’s pay too!

Laura is searching for talented folks to help her business grow, there are certain potential employees that, if hired, can provide her with additional tax benefits. These groups include individuals that have been unemployed for a while, veterans, and others receiving specific types of government assistance.

The Work Opportunity Credit would allow Laura to claim credits for employees that are “Qualified Long-Term Unemployment Recipients” and are hired on or after January 1, 2016.  She must obtain certification of anyone in this targeted group and prior to the day they begin working, they must fill out a Form 8850.  The certification requirements for this credit are that the individual must have been:

  1. Unemployed for more than 27 weeks.
  2. They must have received some federal or state unemployment compensation for a period during that 27 weeks.

“Qualified Veterans” are also included in the Work Opportunity Credit.  To claim this credit for Veterans, Laura must ensure that the individual meets at least one of the following scenarios:

  1. They must have received food stamps from the Supplemental Nutrition Assistance Program for at least 3 months during their 1st year of unemployment.
  2. The individual must have been unemployed at least 4 weeks, but not more than 6 months during the one-year period prior to Laura hiring them.
  3. Prior to being hired by Laura, they must have been unemployed for at least 6 months during the one-year period prior to being hired. This 6 months could be consecutive or periodic time frames.
  4. The veteran has a service connected disability and Laura hires them within the first year of their discharge from the military.
  5. Receiving compensation for a service connected disability and has been unemployed for 6 months, within the one-year period prior to Laura hiring them.

Other individuals that Laura could hire that would qualify for the Work Opportunity Credit are:

  1. Supplemental Security Income recipients that have received benefits within the 60-day period prior to being hired.
  2. Laura could hire an ex-felon that was released from prison within the past year.
  3. An individual that was receiving Temporary Assistance to Needy Families for a total of 18 months prior to being hired or has received periodic benefits totaling 18 months and Laura hires them no more than 2 years after the earliest 18-month period. The individual could have also received benefits for any 9-month period prior to being hired by Laura.
  4. A vocational rehabilitation referral will also allow Laura to take a credit as long as the individual has a disability and has completed training with a state program, Ticket to Work, or the U.S. Department of Veteran Affairs.

Laura has a lot to think about when she begins the hiring process for her salon and can visit https://www.irs.gov/pub/irs-pdf/i5884.pdf for more information, or she can contact us at info@excerebus.com or 407-988-5647.

In our next post we will look at the Credit for Employer Differential Wage Payments.

Categories: Tax Information

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