Larger Tax Credits on Income Tax Return for Small Business Corporate Tax Return with Work Opportunity Tax Credit (WOTC)

Many corporate tax return, S corporation income tax return or other ill-advised small business tax and accounting services clients out there and not because of their own fault are unaware of various government sponsored significantly large tax credits. One of those rather larger amount tax credits available for income tax return for small business is the Work Opportunity Tax Credit (WOTC).

Work Opportunity Credit form 5884

Work opportunity credit is available for qualified wages paid to targeted group employees who begin work before 2026. This credit provides federal corporate tax return, LLC tax return, our own small business tax preparation services clients as well as any business that is filing business tax returns and hires the right kind of employees large tax credits. Whether you are federal corporate tax return filer or any business who files income tax return for small business you may need or have employees already. In essence the government is giving you a significant money, a business tax credit to do something that you need to do anyway, which is to hire employees and grow your business. There is some administrative paperwork required but the benefits and the rewards are by far bigger. There are different categories and tax credit amounts available but the highest maximum potential for a tax credit could be as high as $9,600 per qualified veteran employee for example. One of our small business accounting and tax services clients specialized in this area and they were able to get $48,000 of tax credits. When receiving tax services for business a small business filing business tax returns in a 31% tax bracket would need to spend nearly 155,000 of allowed tax deductible business expenses in order to receive $48,000 worth tax benefits. The best part of the Work Opportunity Credit form 5884 is that the small business filing business tax return or S corporation tax return would not need to spend additional money in the first place but just hire the right kind of workers from what is called a Targeted Group Employees. The Work Opportunity Credit can be considered almost a phantom expense similar to a depreciation expense deduction on real estate property. In this scenario when you file business tax return and use the work opportunity tax credit you replace your business deductions with a tax credit.

Targeted Group Employees

A worker hired by a business filing corporate tax return or filing business tax return of any type of entity would be a member of a targeted group if they are certified by the state workforce agency (SWA) to be one of the following:

A long-term family assistance recipient
A qualified recipient of Temporary Assistance for Needy Families (TANF)
A Qualified Veteran
A designated community residence
A vocational rehabilitation referral
A summer youth employee
A SNAP food stamp recipient
A qualified supplemental Social Security income (SSI) recipient
A qualified long-term unemployment recipient
A qualified ex-felon

Amount of Credit, Wages and Qualified Veterans First Year Wage Limitations

The Work Opportunity Tax Credit is 40% of the qualified first year wages for employees who worked at least 400 hour for the business that is filing business tax return. The WOTC credit is reduced to 25% for those employees who worked at least 120 hours but fewer than 400 hours. The WOTC credit is 50% of qualified second year wages. It is important for corporate tax return, LLC tax return, income tax return for small business or any entities that file business tax return to note the qualified wages that may be taken into account are limited based on the type of certified targeted employee as follows:

$3,000 for summer youth employees
$6,000 for other targeted group employees
$10,000 for long-term family assistance recipients

Certification

All employers regardless of which type of tax form they file business tax return on a corporate tax return, S corporation income tax return, a tax return for LLC, or any income tax return for small business, must obtain certification that an individual is a member of a targeted group before claiming the Work Opportunity Credit. Employers must request certification for each employee from the state workforce agency (SWA) by the day the individual begins work, or complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day the employer filing business tax returns offers the job to the potential employee. Qualified tax-exempt organizations may claim the credit for qualified veterans. To claim the work opportunity tax credit, they file Form 5884-C Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

Conclusion and Final Thoughts

This is a common theme from us, Business Taxes and More. It is real, worthy and we need to mention again that now more than ever it is important for all businesses who file S corporation income tax return, a tax return for LLC, or receive small business tax preparation services and file a corporate tax return or are working on filing business tax return to be aware of current US and global economic trends. There are taxes and hidden taxes to be concerned about. The hidden being inflating the supply of money and depreciating the value of it. As a result, aggressive and legal tax credits are essential for not just for growth or profits but for survival of the business. Businesses taking the work opportunity tax credit must reduce the WOTC credit amount from their salaries and wages deduction. We mentioned earlier in this writing that it takes a lot more tax deductions to pay for an equal amount of tax credits. Tax credits on corporate tax return or any entity filing business tax returns offer much greater tax benefits and should be used first where available. If you are a successful business owner, have hired, retained employees or are a current client of Business Taxes and More receiving small business accounting and tax services or small business tax preparation services you know the challenges of hiring qualified, loyal and productive workers and training them. We are confident that you will capitalize, on the Work Opportunity Tax Credit (WOTC) while making all efforts to give opportunities to qualified and fit workers for your businesses. In the end the goal is to have a profitable business and if you create job opportunities for our veterans and get paid for it, that is a win-win situation for all sides. Please reach out to Business Taxes and More for Work Opportunity Tax Credit (WOTC) form 5884 or any other tax savings opportunities and small business accounting and tax services. You will become a valued client of ours for a very long time.