Through a special arrangement, what follows is an excerpt of a current article from Convenience Store Decisions magazine presented here for discussion.
Every year, thousands of employers fail to claim their fair share of the billions of dollars in government tax credits and incentive programs designed to encourage employers to hire members of specific, usually disadvantaged, groups.
Just to give you an idea of what you may be leaving on the table, a recent study estimates a new health care industry worker who qualifies for one of the federal tax credit programs nets an average of $2,744 in total credits for the employer. And this kind of credit is the best kind of tax benefit because it reduces taxes dollar-for-dollar.
It's astounding then that only one percent of all eligible U.S. employers take advantage of these programs. This means the other 99 percent either don't know about the programs at all or they:
- Believe there would not be a significant return-on-investment.
- Do not have payroll, human resources and tax departments equipped to deal with the rules, regulations, and paperwork.
- Are not willing to adopt new employment screening techniques, revised employee personnel information forms or meet requirements to complete and file the required forms within strict deadlines.
These three objections are overruled, however, by the fact that the entire process can be outsourced with little or no upfront cost. A reputable employment tax credit company can administer every aspect: service initiation, applicant screening, documentation, interaction with government agencies, and comprehensive reporting. These outsourcing companies work with CPAs and payroll service providers and usually charge on a contingency basis; i.e., they only receive a portion of the money earned through the tax credits generated by your hiring process.
The recently revised WOTC Program allows your company to receive a tax credit of up to 40 percent of the first $6,000 in wages paid to an employee who is a qualified member of one or more of the following nine targeted groups:
- Certain families eligible to receive benefits under the Temporary Assistance for Needy Families
- Program
- High-risk youths
- Ex-felons
- Vocational rehabilitation referrals
- Summer youth employees
- Veterans
- Member of a family receiving food stamp benefits
- Person receiving certain Supplemental Security Income (SSI) benefits
- Hurricane Katrina employee (scheduled to expire 8/28/07)
- Welfare-to-work credit/long-term family assistance recipients (This is an addition under the new act and provides for a $10,000 cap for both qualified first-year wages and qualified second-year wages.)
With respect to qualified summer youth employees, the maximum credit is $1,200 (40 percent of the first $3,000).
The Federal Government has also designated approximately 80 distressed communities around the country as either Empowerment Zones (EZ) or Renewal Communities (RC). Employers are eligible for up to $1,500 credit for qualified employees in an EZ and up to $3,000 in an RC.
Take some time to research the companies that specialize in tax credit processing and make sure you're not leaving any money on the table that could be yours.
Discussion Questions: Do you think retailers should be aggressively trying to recoup government credits for hiring employees from "disadvantaged" groups or communities? Should such programs prompt retailers to hire more members of disadvantaged groups?