Take Advantage of Employment Tax Credits!

Congress passed a “tax extenders” bill late last year, preserving dozen of expired tax provisions.  

Among other tax breaks, the Tax Increase Prevention Act of 2014 (TIPA), which was signed by the president last month, authorizes employers to claim tax credits for hiring certain disadvantaged workers, retroactive to the beginning of the year.  

It’s important to note, however, that these tax provisions expired 

again on December 31, 2014.  

What this means is that a business can claim the credits for workers hired last year on its 2014 return, but there are no such guarantees for 2015 or beyond.  

Here’s a brief recap:

An employer may claim a Work Opportunity Tax Credit (WOTC) for 2014 for hiring a qualified individual from one of eight specified target groups.  This covers certain needy individuals, like food stamp recipients, as well as other new-hires on public assistance. (Special rules apply to youths hired to work in empowerment zones during the summer months.)

The amount of the credit is based on a percentage of qualified wages paid to the worker during the first year of employment.

In addition, the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011 expanded the existing credit for hiring qualified veterans.  

Specifically, the VOW made two significant changes relating to the targeted group for veterans:

It opened up the WOTC to certain tax-exempt employers as a credit against its share of Social Security tax.

It increased the allowable credit for hiring qualified veterans; tax-exempt employers can’t claim the WOTC for other target group members. 

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