Job Opportunity Tax Credit: How Small Businesses and Employers Can Apply for It

Job Opportunity Tax Credit: How Small Businesses and Employers Can Apply for It

This tax support can be a relief to small entrepreneurs who are making an effort to hire staff.

Photo: Kate Cimini / The Salinas Californian / Courtesy

The Internal Revenue Service (IRS) disclosed that it is providing transition supports to certain companies that are applying for the Work Opportunity Tax Credit (WOTC), as are stimulating the hiring of various social groups and adhere to current regulations.

According to the IRS, this support is a federal income tax credit available to employers who hire to “certified members of certain groups specified in the Internal Revenue Code who face barriers to employment, including designated community residents or young employees in the summer.”

The credit rule generally equates to 40% of the first year’s qualified wages paid to an eligible employee. For this reason, the IRS can provide a maximum salary amount of up to $ 6,000, this translates to a maximum credit of $ 2,400, which represents 40% of the total that was provided to the employee.

The percentages granted the tax agency to qualified companies will depend on the hours worked by the employee. So this can reduce the credit rate considerably, since each case per worker is different. In this sense, the employer must calmly analyze the status of its collaborators.

For a company to request this tax support, the IRS values ​​that these are plural in their hiring by social segment, so if the applicant company employed Qualified Veterans, Qualified Ex-offendersQualified young people who apply for a position during the summer will have a greater chance of being beneficiaries.

Through Notice 2021-43, the federal agency extends the 28-day deadline for companies to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this anus are a designated community resident or qualified summer youth employee.

To be certified as a designated community resident or a qualified summer youth employee under the WOTC, a worker must have a primary place of residence within an empowerment zone where the employee continuously resides.

The Empowerment Zone designations ended on December 31, 2020, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act of 2021, allowed the designations to be extended until 2025.

On May 26, 2021, all Empowerment Zone designations were extended from December 31, 2020 to December 31, 2025. The transition relief under this notice allows businesses to file Form 8850, which is the notice of Pre-evaluation and Certification Request for the Job Opportunity Credit, for these employees until November 8. 2021.

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