Tax Credits Are Golden
Here's a reason to introduce your accountant to even your most junior hires: Some of them may qualify you for generous tax savings. If you employ certain types of disadvantaged workers, you may be eligible for the lucrative Work Opportunity Tax Credit (WOTC). Congress spells out with extreme precision -- and periodic updates - which workers qualify. Here are some examples: those between the ages of 18 and 39 who live in federally designated enterprise communities; ex-felons hired within one year of their release date; recently discharged veterans injured in the line of duty and out of work for six months or more.
The WOTC can lower your federal tax bill by as much as $4,800 per qualified worker during the first year of employment. However, the paperwork requirements are stiff. You need to complete the one-page IRS form 8850 on the day an employee is hired, and it must be mailed within 28 days of the person's start date. The WOTC is tailor-made for restaurants, retailers, and other industries that use a lot of unskilled labor. Yet tax experts note that these very businesses, especially small ones, hardly ever claim it.
Chances are you're ill inclined to immerse yourself in the IRS tax code, all 3.4 million words of it. So how do you make sure you're getting your rightful breaks?
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