Tax Credit Available for Van Wert and Paulding Employers
Arend, Laukhuf & Stoller, Inc.
Work Opportunity Tax Credit Alert:
Congress now has a tax credit available especially for Van Wert and Paulding county employers. This credit is called the Work Opportunity Tax Credit. Crawford, Monroe and Seneca are the other counties in Ohio that also qualify.
How you can benefit from this tax credit?
All businesses who hire a resident of Van Wert or Paulding counties may now qualify for a $2,400 credit for the first $6,000 in wages paid to a newly hired employee.
What Is Required?
1. Employee’s residence – the employee’s principle place of residence must be a rural renewal county (both Van Wert and Paulding qualify).
2. Employee’s age – must be between the ages of 18 and 39 as of the date he or she is hired.
3. Certification Requirements – you must meet one of two requirements:
- On or before the day an individual begins work, the employer has received a certification from state employment agency that the employee is a resident of the rural renewal county.
- On or before the day an individual is offered employment with the employer, a pre-screening notice is completed by the employer with respect to such individual, and not later than the 28th day after the individual begins work for the employer, the employer submits such notice, signed by the employer and the individual under penalties of perjury, to the designated state agency as part of a written request for certification.
- IRS Form 8850, Pre-Screening Notice and Certification Request for Work Opportunity Credit may be used for this purpose.
- ETA Form 9061 from the Department of Labor is required by the Department of Job and Family Services for Ohio purposes.
Other Qualifications:
1. No credit is allowed on employees who work less than 120 hours in the first year of employment.
2. No credit is allowed for wages paid to a relative or dependent of the taxpayer.
3. No credit is allowed for wages paid to an individual who is more than 50% owner of the entity.
4. The credit is generally not allowed for wages paid to an employee previously employed by the employer.
How is the credit calculated?
1. Multiply 40% times the first $6,000 in wages paid to the new employee who is certified as a rural renewal county resident and between the ages of 18 and 39 (40% x $6,000 = $2,400).
2. Add the credit amounts from all employees that qualify together.
a. If you have 5 employees that qualify at the maximum $2,400 than you would receive a credit of $12,000 on your tax return.
3. No deduction is allowed for the portion of wages equal to the amount of the credit taken for the tax year.
4. The credit is subject to the overall limitations on the amount of business credits that can be taken in any tax year, but a 1-year carryback and 20-year carryforward of unused business credits is allowed.
a. An employer can elect to not have the credit apply.
Dot Your “i’s” and Cross Your “t’s” – Paperwork Matters!
This credit is a substantial tax benefit that is often missed by employers because it takes paperwork and time to qualify for the certification.
Recommendation:
Please be sure to give the IRS form 8850 and ETA Form 9061 to the employee the day you offer employment. These forms must be signed on the same day the job offer is made. If the forms are merged into your standard screening or new hire process you will ensure you do not miss future tax credit opportunities. Instruct your human resource department to follow the certification process as outlined above and you will be on your way to receiving a windfall of tax savings.
Conclusion:
Take advantage of this unique opportunity to reap tax credit benefits for your business. This window of opportunity will only be open until September 1, 2011. The government put this policy in place to help business located in rural renewal counties and so we encourage you to take advantage of this credit to reduce your tax bill, benefiting you and your business.
Take Action:
Visit the following website of the Ohio Department of Job and Family Services to get specific instructions on how to participate in this program:
http://jfs.ohio.gov/wotc/Participate.stm
Please contact us and we will be happy to meet with you.