During these unstable economic times businesses are confronted with new variables and many tough decisions. Employers have been forced to slow down hiring or part ways with employees. So, you may wonder:
Why is now a good time to consider hiring-based and employment-based tax credits?
There are two reasons… one related to each type of tax credit we’ll explore in this article.
- 1. Hiring will begin again. And, when it does, employers who have not set up the proper process to screen for hiring-based tax credits will lose out on the benefit they can offer. Employers will want to use any slow time get these to maximize the use of tax credits as part of their comeback strategy.
- 2. There are retroactive tax credits that could impact tax filings for 2019. Due to the tax filing extension, some employers now have time to go back and screen for certain business income tax credits to possibly decrease their tax liability. This is an important step to take since a lower tax liability could mean a better cash position.
HireCredit, a wholly owned subsidiary of analytic.li, offers employment-based tax credits and other tax incentive services. Now is the time to assess your situation and put the right processes in place, so you can re-assess your current tax liability and start earning credits as soon as you restart hiring.
Active Employment Based Tax Credits: WOTC, FEDEZ and IEC
While the Work Opportunity Tax Credit (a hiring based tax credit we’ll discuss later) was already in place, the Further Consolidated Appropriations Act, 2020, re-instated and made retroactive the Federal Empowerment Zone (FEDEZ) and Indian Employment Credit (IEC) tax credit programs. To be clear, this December 2019 decision renewed the Work Opportunity Tax Credit (a tax credit HireCredit may currently process for you) through the end of 2020.
What’s the impact of each tax credit?
Work Opportunity Tax Credit
What is it?
WOTC is designed to incentive employers to provide employment opportunities to statistically disadvantaged individuals with a one-time tax credit. These tax credits vary in maximum earning potentials, ranging from $750-$9,600 per certified employee, depending on certified WOTC Category, number of hours worked, and hourly wage. For more information on the categories, visit our HireCredit Tax Credit Categories resource.
How does it work?
Employers simply administer a survey to applicants and new hires to screen for eligibility. Following the screening, HireCredit collects the survey responses and submits applications to the state for official certification and begins calculating tax credits.
How do companies use it?
At the end of your fiscal year, your company will receive a tax package with all the details for claiming the credits.
What’s the impact?
If a business hires 100 employees a year and 12% of them are identified as eligible for WOTC under the most commonly certified WOTC Categories, these 12 employees could result in up to $28,000 in tax credits.
Federal Empowerment Zone (FEDEZ) and Indian Employment Credit (IEC )
What is it?
FEDEZ and IEC are programs designed to provide incentives in the form of business income tax credits to for-profit businesses operating in and hiring residents from economically distressed areas.
How does it work?
Employers located in a FEDEZ may be able to capture up to $3,000 per qualified employee per year; employers located in or near Indian Reservations could capture up to $4,000 per qualified employee per year. If not taken already, credits may be earned from 2018-2020. HireCredit helps employers by making the identification and tracking of earned tax credits simpler.
Why should companies think about this now?
The impact could be sizable for your organization. For example, if a business located in a FEDEZ had 10 qualified employees per year for three years, it could mean as much as $90,000 in tax credits.
Be Prepared and Start Earning Tax Credits
While a FEDEZ and IEC screening can happen at any time, the best time to set up WOTC is ahead of your future recruitment and/or re-hiring efforts.
How to take advantage of WOTC Credits:
- Contact email@example.com via the button below.
- We'll review your existing workforce numbers and recruitment habits.
- You'll receive an overview of the implementation and screening processes, as well as an estimation of potential tax credit earnings.
- Then, we’ll implementation and screening immediately, and we'll do the rest.
How to take advantage of FEDEZ and IEC Credits:
- Contact firstname.lastname@example.org
- We’ll ask for a full address list of your business locations and work-sites in Excel.
- For any locations found in the zone, we’ll work with you to get the necessary employee data to calculate the credit.
- And, we'll provide you with a tax package for your 2019 federal return.
Let us help you get all the tax credits.
Customers and partners are happy to share their experience working with us:
“The HireCredit program goes above and beyond in identifying all possible tax credits. Not only are we able to identify which applicants pre-qualify but we can also see each new hire’s progression through the tax credit redemption process. It’s been great to have the HireCredit team to talk through survey performance and ways CBE can maximize its tax credit potential.”
Barb Findley, Manager, CBE
“Being the CEO, it’s incredibly important to me that my business finds new ways to serve our customers. When I initially made the decision to partner with HireCredit, I was not prepared for them to exceed expectations so quickly. They really do delight in serving their customers, and because of that, we now have an exceptional, nation-wide tax credit maximization service added to our repertoire. Knowing that we are putting money back in our customers’ pockets and providing the best payroll experience to date is a fantastic feeling.”
Andy Zelt, CEO, Axiom
For further information related to tax credit incentives, please call us at 844.663.7722 or send an email to email@example.com
Note: * This affects any person with a Federal income tax payment or a Federal income tax return due April 15, 2020. The term “person” includes an individual, a trust, estate, partnership, association, company or corporation, as provided in section 7701(a)(1) of the Code.