Driving Increased Profits with Federal Hiring Incentives
By Brandon Edwards President, Tax Credit Co. | February 27, 2011
There are two ways to increase profits – raising revenue or lowering costs. Hospitality employers often miss opportunities to lower costs by missing valuable tax savings attributable to hiring incentives.
The federal government provides businesses with tax credits for hiring members of disadvantaged groups. This often represents a larger share of a hotel's staff than one would imagine. A member of a targeted group can be as simple as someone who lives in a designated area to one of the 40 million plus recipients of food stamps. Overall, a hospitality employer can expect between 15% and 25% of new hires to qualify for tax credits. Here is a rundown of the major programs to look at for 2011:
Work Opportunity Tax Credit (WOTC):
WOTC encourages the hiring of individuals on government aid such as food stamps, welfare, disability, etc. as well as members of groups that have barriers to employment such as ex-felons, disabled or unemployed veterans, Native Americans, etc. The program has become the primary vehicle for providing hiring incentives at the federal level for specific urgent needs, including post-911 hiring in Manhattan, areas affected by Hurricane Katrina and Rita, veterans returning from Iraq and Afghanistan and others. Applications for qualified hires have to be submitted within 28 days of start date. The main challenge for employers when it comes to WOTC is the strict process imposed by the federal government in order to qualify. Requirements include:
- Presenting the forms to the job applicant on or before the start date: The employee and employer both sign a form attesting to the fact that the information was provided to the individual on or before start.
- Ensuring that the employer and employee sign and return the forms within 28 days of start: This is opposed to many hiring incentive programs nationally that allow companies a longer retroactive qualification window.
- Ensuring the paperwork is returned with a "wet" signature: That's right, no electronic versions, including faxed or copied forms. The paperwork must be the original that the employee signed in order to be valid. Although federal regulations allow for electronic submission, only two states have implemented the process so far.
The credit amounts are a calculation of wages, with the amount dependent on the qualification category. Maximum credits range from $1,200 for the qualified summer youth employment, $4,800 for certain military veterans and $2,400 for other categories.
Welfare-to-Work Tax Credit: