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Tax Loophole – Save Big on Wages Paid To Employees

By on August 13, 2016 in Accounting, What We Do with 0 Comments

building-1080595Have you hired an employee who belongs to one of the following groups between January 1, 2015, and August 31, 2016?

  1. Unemployed Veterans (including disabled veterans)
  2. Temporary Assistance for Needy Families (TANF) Recipients
  3. Food Stamp (SNAP) Recipients
  4. Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
  5. Vocational Rehabilitation Referred Individuals
  6. Ex-Felons
  7. Supplemental Security Income Recipients
  8. Summer Youth Employees (living in Empowerment Zones)

If you have hired any person who falls into the above category, you can save thousands of dollars on taxes. To do this, take advantage of the Work Opportunity Tax Credit (WOTC) by filing with your state workforce agency before September 28, 2016!

The IRS recently provided an extension to businesses allowing them to submit Form 8850 on employees who belong to targeted groups. As a result, businesses can claim the WOTC on their taxes for qualifying employees hired in the past 18 months.

 

Here’s what you need to know about the tax credit

  1. The Work Opportunity Tax Credit (WOTC) rewards businesses for hiring certain “targeted groups” (listed above) that have a high unemployment rate or special employment needs.
  2. The WOTC will reimburse employers as a tax credit for 20-40% of wages paid to qualified employees. As a result, your painting business could save thousands of dollars.
  3. If you hired employees between January 1, 2015, and August 31, 2016, that belong to a targeted group, you can still qualify for the credit. To do so, you must submit Form 8850 on each qualifying employee to your state workforce agency before September 31, 2016.

 

Here’s what you need to do to claim the tax credit

  1. Screen all employees hired between January 1, 2015, and August 31, 2016, and determine if they belong to a targeted group. Use Form 8850 to screen employees.
  2. Send potential qualifying employees’ Form 8850s to your state workforce agency. In addition, determine your state workforce agency and any additional state requirements by referencing this PDF.
  3. Wait for a final determination from your state workforce agency.
  4. Once you receive approval, you can claim the WOTC on your tax return and save big.

Once you have done this, ensure you implement a system to screen new hires for the WOTC. For more information on the WOTC and other tax tips, check out this free report for painting contractors.

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