Tax Credits Blog

Behind the Scenes at Employer Incentives

Tax Credits are a tricky business. Lots of paperwork, record keeping and following up.  Here’s a look at what we do behind the scenes at Employer Incentives.

From when your new hires sign the forms, the clock starts ticking. We have 28 days to receive the forms, do all our in-house processing, and file them with the individual States. WOTC and the VOW To Hire Heroes Act are federally mandated programs and tax credits, but the states control the processes. When we receive the 8850 and 9600, our staff goes through each form and searches several federal and state government databases on each applicant. Once we feel we have researched each applicant to the fullest, we then file the applications with the state within the 28 day window. After this, we play the waiting game.

Some states are faster than others, some are lenient, and some are very strict with the rules. This is why some states have a higher certification rate than others. We are in constant contact with all the SWA’s (State Workforce Agencies) making sure that they are doing all they can do to get your employees certified.

The states will then send us one of 3 letters for each individual: Certified, Denied, or Needs more Info.  When we receive a denied letter, there really isn’t anything we can do. The state has decided that this person isn’t eligible for whatever reason. When we get a needs letter, we go to work exhausting every resource possible to get the supporting documentation to the state in order to certify this employee. We have contacts at the National Records Center and Social Security Administration for verifying veterans and disability records. We will sometimes contact our clients for the supporting documentation. The documentation can be as simple as a copy of the employee’s records (Driver’s License, W4 or I9), or something more difficult to obtain such as Proof of Veteran Status, disability income, conviction/release dates, or vocational rehab services (these are job programs run by the government and Veteran’s Administration). To get the most employees certified, if an employee checks off any of these hard to prove target groups PLEASE ask them for documentation and send us a copy. In fact, it would really help us help you get all the credits you can.

When we get Certification letters in, the other side of our service kicks in. We will start sending you a monthly Excel Spreadsheet with the names of the certified employees and some blank cells asking for payroll data. In order to calculate the correct amount of credits, we need the hours worked and gross pay for the employees over certain specific time periods. The time periods are important on this worksheet, as WOTC has different levels of tax credits for each target group and hours worked. Some are even credits you can take again during the employee’s second year with you. We also use these monthly worksheets to keep track of the credits already earned in prior months, so you can be assured you are getting the correct credits as well as the maximum possible.

At the end of the tax year, you will get a report that details your credit activity for the year, a copy of the certification letters for your records, and a filled out IRS Form 5884 that you include with your tax return. Give that to your accountant (or file it yourself), and Voila! You have just put money, FREE MONEY, back in your pocket! (And who doesn’t want free money????)


WOTC Program Permanency

President Obama submitted his budget for 2014 in April this year, and with it he outlined his plan to cut funding for Social Security, univeral access to pre-kindergarten education for children, cuts to the defense budget, among other things. But, one proposal caught our eye:

"The Administration also continues its support of tax credits that will help employ veterans. The Returning Heroes Tax Credit, which provides up to $5,600 to employers, and the Wounded Warrior Tax Credit, which provides up to $9,600 to hire long-term unemployed veterans with service-connected disabilities, were recently extended for one more year in the American Taxpayer Relief Act of 2012. These credits are a part of the Work Opportunity Tax Credit (WOTC), which contains other categories targeted to hiring veterans. The Budget proposes to permanently extend the WOTC."

From the Budget of the United States Government, Fiscal Year 2014, as reported at  http://www.whitehouse.gov/omb/budget/Overview

Permanently extending WOTC would be a boon to all employers in this company and greatly increase hiring and the pace of American job creation. Of course, the budget has to go through the debate process and both the Senate and House of Representatives will undoubtedly have objections. But if WOTC becomes permanent, never will we have to go through a hiatus period like we did in 2012, and it seems like this administration wants to make it a priority.


New York Explains Backlog

From a letter from Russell J. Oliver, Bureau Chief, Division of Employment and Workforce Solutions, State of New York to Ken Brice of CFO Resources:


"As you [are] aware, we were unable to completely process WOTC applications during calendar year 2012 due to the lack of federal legislation. Once we received approval in January 2013, we immediately worked to decrease our Other states also experienced a backlog because of this situation. 


"Additionally, under IRS Notice 14-2013, temporary relief was granted to employers who did not file their applications during the hiatus. This notice lifted the 28 day timeliness requirement, as long as applications were filed by April 29, 2013, for any hires from January 1, 2012 through March 31, 2013. This relief created a large number of applications to be submitted, impacting our backlog. 


"In order to address the backlog, we have added additional staff and are looking into better automating our processes. We are hopeful that we will not experience a delay in federal authorizing legislation in the future. Providing the best services to our state's businesses is our goal. Even with delays outside our control, we will continue to work had to meet this goal."


So it seems like New York is finally getting on the ball with the WOTC applications that they have pending from us. Keep sending in those forms, and we'll keep getting you those credits.


California Plans Big Changes!

More News from the WOTC Planet!


California Governor Jerry Brown released his May budget revise today, revealing additional intentions for the State’s enterprise-zone program.

From page 68:

“The [enterprise zone] hiring credit will be refocused to specificareas with high unemployment and poverty rates. This credit will be available for the hiring of long-term unemployed workers, unemployed veterans, and people receiving public assistance. The Enterprise Zone sales tax program will be expanded to a statewide, upfront sales tax exemption for manufacturing or biotech research and development equipment purchases.”

This budget document does not specify how these changes might be accomplished. It is clear to me, however, that new legislation would be required because this vision of the program varies substantially from that outlined in current law.

In his 2011-2012 budget proposals, Governor Brown proposed the outright elimination of the enterprise zone program.  He was unsuccessful, however, at overcoming legislators’ opposition to  the program’s death.  Since that time, the California’s legislature has experience a significant change in its membership. Perhaps this time, Governor Brown will be more successful at effectuating these serious although less drastic changes.

Not mentioned in the budget revise are the other enterprise zone tax benefits such as the net operating loss carryover, net-interest deduction for lenders, the business expense deduction and preference points for bidders on certain kinds of state procurement contracts.

UPDATE:  After listening to the California State Assembly Budget Subcommittee  May 22nd hearing on the Governor’s Enterprise Zone proposal, it is crystal clear to all that the Governor intends to replace the Enterprise Zone hiring credit program.


As for the President's push to make the WOTC permanent, stay tuned. No info yet, but we hope soon!


Good News on the Horizon!

President Obama has included the permanent extensions of the Work Opportunity Tax Credits (WOTC) in his current budget.

He wants to add the veteran's category that he signed into law in November 2011 to the IRS Tax Code and, by default, add the other categories as well.

It appears to have a good chance of passing.

Keep your fingers crossed.


Ken Brice