Employers: It’s not too late to snag some significant tax credits for your business. There are certain exclusions and deductions that can make a huge difference to your tax bill, whether you’re a big company or a small one. For example:
- A tax exclusion for employer transit and vanpool benefits: This fiscal cliff provision means that an employer who certain transportation fringe benefits can deduct part of the cost of those benefits from the taxable wages paid to that employee. This includes parking, transit passes, vanpool (carpooling, share a ride) benefits and qualified bicycle commuting reimbursements (Hear that Austin?), So if you provide vanpool or transit pass benefits or qualified parking you can exclude $245 a month of that employee’s taxable wages from your tax burden. Unfortunately, bicycle commuting benefits are only $20 a month.
- Employer provided tuition assistance: Since there’s no end to the amount of education and knowledge you have to have to keep up in the world, tuition assistance for graduate or undergraduate courses has become a very sexy benefit for winning the best candidates. If you, as an employer, pay for that education, you can deduct up to $5,250 a year from that employee’s taxable income.
- Credit for Child and Dependent Care: This is a huge benefit for employees crunched between raising children and caring for aging parents. If you, as an employer, provide any assistance toward your employee’s ability to care for children or other dependents so that that employee can work, you can claim up $5,000 a year credit. A tax credit is different from an exclusion. You’re not just lopping it off the employee’s taxable wages, you’re lopping it off your tax burden. There are some caveats about highly compensated employees who own more than 5 percent of the company or earn more than $115,000.
- Work Opportunity Tax Credit: You’ve got four days to file applications for 2012 on this credit which gives a break to employers who hire qualified veterans. Usually you’d have to fill out a Form 8850 Pre-screening Notice and Certification Request within 28 days after hiring a qualified veteran. But the fiscal cliff bill waives that and gives you until March 31 to submit it. Hiring qualified veterans gives you a credit of between $2,400 to $9,600 per employee. There are some other groups that qualify for this tax credit as well. People who have been receiving Temporary Assistance for Needy Families or Supplemental Security Income for a given amount of time qualify. Some disabled workers qualify. Ex-felons qualify if they’ve been released within a year. Former employees in these groups who you’re bringing back, sadly, don’t qualify.
The IRS has an Employer’s Tax Guide to Fringe Benefits that gives a lot of the details. But the word “qualified” means there are many, many specifics that determine what exclusions or deductions you can receive and in what amounts.
Plus there’s an HR issue. How do you, in the process of hiring employees, identify someone as part of one of these groups without being seen to discriminate? Actually, Valentine HR has an answer for that one. There are ways to glean information about your candidates during the application process. Our Startup Package, for example, has application forms customized by state for each client to ensure that you can ask the questions you need as a tax-paying employer.
Plus, we’re happy to help you figure out what you need to know to make good hires from groups that are underrepresented and listed as WOTC groups.
We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business. Contact me at Caroline@valentinehr.com or call (512) 420-8267.