Habif, Arogeti & Wynne, LLP’s Retail, Franchising & Hospitality group
As a business owner, you’re always on the lookout for new opportunities to save money and increase your working capital. Tax credits provide a method for minimizing your income tax liabilities, giving you money to reinvest into your business. If you’re not already utilizing it, here’s a tax credit that you should be taking: the Work Opportunity Tax Credit (WOTC).
The WOTC was created in 1996 and has since been modified and extended several times. It’s a federal tax credit that encourages companies to hire employees from groups that have faced significant barriers to employment. Those groups include recipients of the Temporary Assistance for Needy Families (TANF) program, veterans, people aged 18-39 who receive Supplemental Nutrition Assistance Program (SNAP) benefits, residents within Empowerment Zones or Rural Renewal Counties, youths aged 16-17 who hold summer jobs, disabled persons referred for state-approved vocational rehabilitation and recipients of Supplemental Security Income benefits.
As a restaurant owner, chances are you’ve hired someone in the last year who fits into one of those categories. Depending on the category, you could be eligible for a sizable tax credit. For most adults hired from those categories, your credit would typically come out to approximately $2,400 per employee (40 percent of the first $6,000 in wages paid during the employee’s first year of employment). That means that if you hired just five adult workers meeting one of those criteria, you could potentially get $12,000 from the WOTC.
And it could be more, depending on your growth and hiring practices. Hiring from certain groups, such as veterans with a service-related disability or long-term welfare recipients, results in a higher credit. In some instances, you can receive up to $9,600 for an eligible new hire.
As of right now, the credit can be taken during the 2013 tax year for workers hired before Jan. 1, 2014. The credit has not yet been extended for 2014, but Congress has always retroactively renewed the credit when it has lapsed in the past. Thus, it’s a good idea to start planning now and be prepared when the time arrives.
Don’t leave any money on the table; make sure you’re taking advantage of Work Opportunity Tax Credits!
Learn about more potential tax savings opportunities by contacting Tommy Lee at email@example.com.