 There are currently more than 2,000 federal, state and local tax credits available to businesses throughout the country. Proper utilization and calculation of these credits reduces the taxes of many businesses, thus putting more money in their pockets.
In order to take advantage of the tax credits, the employer must do the following:
- Identify the Eligible Credits
- Obtain Information to Apply for the Credits
- Complete the numerous forms Required to Apply for the Credits
- Follow-Up with the appropriate Government Agencies for Certification
- Calculate the Credit for the Company's Tax Return
What are Tax Credits?
Tax Credits are a direct reduction in the income tax that is owed. They are not tax deductions, but a pure dollar for dollar reduction in the amount of income tax owed to the tax authorities.
Why do Tax Credits Exist?
Tax credits are typically available to provide incentives for businesses for various reasons. Some incentives are to encourage the hiring of individuals that may have a harder time finding employment, locating a business in an otherwise undesirable location, or to provide a public service to a particular sector (for example, veterans).
What are some of the most Common Credits?
Work Opportunity Tax Credit
Empowerment Zone Credits
Renewal Employment Credit
Federal Indian Employment Credit
State Point of Hire Credits
State Training/Retraining Credits
Work Opportunity Tax Credit:
The Work Opportunity Tax Credit is a Federal credit that is designed to encourage employers to hire new employees from "targeted groups". The tax credit amount ranges from $2,400 to $9,000 per qualified employee, depending on the category of the employee. Listed below are some of the "targeted groups":
Food Stamp recipients ages 18 through 39
Aid to Families with Dependent Children Recipient
Veterans Receiving Food Stamps
Qualified Ex-Felon, pardoned, paroled or work released
Vocational Rehabilitation Referrals
Qualified Supplemental Security Income (SSI) Recipients
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