Doing the right thing doesn’t always get rewarded. We all know the saying, “No good deed goes unpunished.” But that is not the topic of this blog. This time, doing good is being rewarded by the federal government. Shocked? Read on.
There are tax credits for hiring people who need an extra boost, being particularly good to your employees about leave, and providing healthcare as a small company. These and more are important tax credits to know about.
Before I go on, let me emphasize the difference between a tax credit and a tax deduction. A tax deduction lowers your taxable income by a given amount, but it may not make that much of a difference depending con your taxable income as a business. So, a $2,000 deduction may only wind up saving you a few hundred dollars. A tax credit is a dollar-for-dollar refund. That’s $2,000 back. A tax deduction is good, but a tax credit is waaay better!
The 2017 Tax Cuts and Job Act includes a tax credit that’s an incentive for small businesses to offer paid family leave to employees. To receive this credit, your small business must have or create a policy and procedures for family leave and offer at least two weeks of paid leave each year to “qualifying employees.” Remember, this leave must be in addition to vacation, sick time or other paid time off. There are additional details and rules so be sure and review with your tax expert or your friendly HR consultant.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers who hire people from certain target groups who have consistently faced significant barriers to employment, like disabled veterans, people who receive Temporary Assistance for Needy Families or Food Stamps, ex-felons, community residents or summer youth employees living in Empowerment Zones and vocational rehabilitation referred individuals.
In some of these cases, employers are taking an extra risk to hire some of these people. They might require more training or they might need more support to fit comfortably into the organizational culture. Often the risk is more perceived than real. In either case, the federal government recognizes — particularly in this employment climate — employers that sometimes go the extra mile to hire people from these groups and wants to make that easier.
The government also wants to reward those small businesses that go out of their way to take care of the employees they do have. These include:
• Health Insurance – If you have fewer than 25 full-time equivalent employees who earn an average wage of less than $50,000 a year and you pay at least half their employee health insurance premiums, you get a tax credit!
• Accessibility Expenditures — If you earned $1 million or less in the past year or had 30 or fewer full-time employees, you might be able to take up to a $5,000 credit annually for providing accessibility for your employees!
Of course, it’s the federal government and its taxes. So you have to make sure you fit all the criteria and you fill out all the forms and keep all the receipts and cross your t’s and dot your i’s, but it’s still getting a financial break for basically doing the right thing, anyway. If you’re thinking about hiring, or considering whether your business or organization is accessible and part of solving the problem for people who really want —but have trouble getting — jobs, don’t forget to look into these cool federal benefits.
And if you want help figuring out how to develop and implement any of these, please contact us. We can help.