Tax Incentives Promote Hiring Individuals who Face Barriers to Employment
It is no secret that finding employees is a challenge for many businesses during 2021. Two federal tax credits and one tax deduction encourage employers to hire individuals who historically have had difficulty finding work.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit is a federal tax credit available to employers that hire employees in the following categories: qualified veterans, vocational rehabilitation referrals, state welfare benefit recipients, ex-felons, designated community representatives, summer youth employees, supplemental nutrition assistance program ("SNAP") recipients, supplemental security income (SSI) recipients, long-term family assistance recipients, and qualified long-term unemployment recipients.
Each of these categories requires the employee to meet certain characteristics. As an example, a qualified veteran is explained below. The remaining categories are explained at https://www.irs.gov/ businesses/small-businesses-self-employed/ work-opportunity-tox-credit
A qualified veteran is a veteran who meets any of the following requirements:
1. A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (food stamps) for at least three months during the first 15 months of employment;
2. Unemployed for a period totaling at least four weeks (whether or not consecutive) but less than six months in the one-year period ending on the hiring date;
3. Unemployed for a period totaling at least six months in the one-year period ending on the hiring date;
4. A disabled veteran entitled to compensation for a service connected disability hired not more than one year after being discharged or released from active duty in the U.S. armed forces; or
5. A disabled veteran entitled to compensation for a service connected disability who is unemployed for a period totaling at least six months in the one-year period ending on the hiring date.
In order to obtain the credit, Pennsylvania employers must file IRS Form 8850, Pre- Screen Notice and Certification Request for the Work Opportunity Credit, with the Bureau of Workforce Development within 28 days after the eligible worker begins work. The credit is limited to the amount of the business income tax or Social Security tax owed. A taxable business may apply the credit against its business income tax liability, and the normal carry-back and carry-forward rules apply. For qualified tax- exempt organizations, the credit is limited to the amount of employer Social Security tax owed on wages paid to all employees for the period the credit is claimed. The work opportunity credit is available through the end of 2025.
Disabled Access Credit
The Disabled Access Credit is a non- refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full-time employees in the previous year. Eligible expenditures including amounts paid or incurred to remove barriers that prevent a business from being accessible or usable by persons with disabilities, provide qualified interpreters or other methods of making audio materials available to hearing impaired individuals. provide qualified readers, tape, text or other methods of making visual materials available to individuals with visual impairments, or acquire or modify equipment/devices for individuals with disabilities.
Architectural Barrier Removal Deduction
The Architectural Barrier Removal Tax Deduction may be claimed up to $15,000 per year for qualified expenses for items that normally must be capitalized. This deduction may be used in the same year as the Disabled Access Credit if the requirements for the credit and the deduction are met.
More details regarding each of these tax credits and deductions and how to claim them is available on the IRS Website.
For more information, contact Tom Pendleton at MacDonald lig at tpendleton@mijb.com or 814/870-7756.
Article featured in the Manufacturer and Business Associations' September 2021 Business Magazine
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