Fritz: All Fritz/All Fritz.zip/All Fritz/FILES/BUSITION/SBA.LZH/FSBA.EXE/F250.SBE

Text File | 1992-10-24 | 7KB | 156 lines

@108 CHAP 8

        ┌───────────────────────────────────────────────┐
        │ TARGETED JOBS TAX CREDIT FOR HIRING EMPLOYEES │
        └───────────────────────────────────────────────┘

If you hire members of certain economically disadvantaged
groups, the federal government will pay you a subsidy of up
to $2,400 per employee in the form of "Targeted Jobs Tax
Credits" against your income tax liability.  Unfortunately,
most small business employers seem to be unaware of this
substantial tax subsidy or else mistakenly assume that it
applies only if you hire ex-felons or the like.

Part of the reason so many employers fail to take advantage
of this tax giveaway appears to be on account of a Catch-22
in the way the program works:  To qualify for the targeted
jobs credit for hiring a disadvantaged category person, he
or she must be certified as such by a designated state em-
ployment security agency and the certification must be re-
ceived by the employer (or requested in writing) at least
one day before the employee begins work.

At the same time, state and federal anti-discrimination
laws make it very difficult for you as an employer to ask
prospective job applicants if they belong to any of the
disadvantaged groups that are eligible for the tax credits,
since to do so could be considered a discriminatory hiring
practice....

Solution?  One possibility would be to routinely tell peo-
ple when you decide to hire them, but before they start
work for you, that your firm pays a $100 bonus to any new
employee that can get a certification from the state agency
that he or she qualifies as a member of one of the targeted
groups.  Then give the employee a list of the targeted
group categories, and let him or her volunteer the infor-
mation if they qualify.  Remember, if it appears the new
hire qualifies, you must request a certification from the
state employment security agency at least a day BEFORE em-
ployment begins.

The targeted group individuals for whom you can claim the
jobs tax credit when you hire them are as follows:

    . VOCATIONAL REHABILITATION REFERRALS.  These are cer-
      tain handicapped individuals who have completed
      rehabilitation programs.

    . ECONOMICALLY DISADVANTAGED YOUTHS.  People between
      ages 18 and 22 who are certified as being members
      of economically disadvantaged families.

    . ECONOMICALLY DISADVANTAGED VIETNAM VETERANS.

    . SSI RECIPIENTS.  Persons receiving SSI payments
      from Social Security.

    . GENERAL ASSISTANCE RECIPIENTS.  Persons receiving
      state or local welfare payments.

    . ECONOMICALLY DISADVANTAGED EX-CONVICTS.

    . YOUTHS PARTICIPATING IN A COOPERATIVE EDUCATION
      PROGRAM.  Certain youths ages 16-20 who have not
      finished high school.

    . ELIGIBLE WORK INCENTIVE PROGRAM EMPLOYEES.

    . QUALIFIED SUMMER YOUTH EMPLOYEES.  Economically
      disadvantaged youths 16 or 17 years old who are
      hired to work between May 1 and September 15, who
      were not previously employed by you.

On the first $6,000 you pay an eligible target group em-
ployee, you will earn tax credits of 40% of the wages, if
the employee works a minimum of 90 days or 120 hours for
you.  (For "qualified summer youths" the minimum period is
only 14 days or 20 hours, but the credit is allowed on only
the first $3,000 of wages during the first 90 days.)  The
credit is not allowed for wages paid to strikebreakers or
"scabs."  NOTE: One drawback of this tax credit is that you
must reduce the wages you can deduct dollar-for-dollar for
the jobs credits you claim.  That is, if you pay someone
$1,000 and claim a $400 targeted jobs tax credit, you can
only deduct $600 for wage expense on your tax return, not
the full $1,000.

    NOTE THAT THE TARGETED JOBS TAX CREDIT WAS SCHEDULED
    TO EXPIRE ON JUNE 30, 1992, BUT WILL LIKELY BE EXTENDED
    AGAIN.

@CODE: CA HI
@CODE:NF
@CODE:OF
@CODE: CA
California has its own jobs tax credit program, somewhat
similar to the federal jobs credit described above.  The
California Employment Development Dept. (EDD) is the state
agency that certifies individuals as eligible employees
under both the federal and state jobs tax credit laws.
There is some overlap with the federal targeted jobs cred-
it in the categories of eligible employees, but for the
most part the state requirements are different.

The state jobs credit for eligible and certified employees
is as follows:

    . For the first 12 months of employment, a tax credit
      equal to 10% of the first $3,000 of wages paid to the
      employee.

    . For the second year of employment, a tax credit of
      10% of the first $3,000 of wages for such period.

Thus, the maximum California jobs credit is $600 per em-
ployee, earned over a 2-year period.  The state jobs credit
is NOT allowed as an offset against the California alterna-
tive minimum tax or the corporation minimum franchise tax.
Note that the California jobs credit is due to expire on
December 31, 1993.

California also provides certain special jobs tax credits
for hiring disadvantaged or unemployed persons in "Enter-
prise Zones" and "High-Density Unemployment Areas" that
have been designated in certain parts of the state that
are economically depressed.

Employers in California may also claim a 50% credit (up to
$600 per dependent) under a plan providing child care for
employees, and, effective in 1994, certain small employers
(25 or fewer employees) may claim a health care tax cred-
it, generally the greater of $25 per month per covered em-
ployee or 25% of the amount paid, as a credit against the
employer's California income or franchise tax liability.

@CODE:OF
@CODE: HI
@CODE:NF
The Hawaii legislature has enacted a "targeted jobs tax
credit" equal to 20% of the first $6,000 of "qualified
first-year wages."  It applies only to wages paid to an
individual who is a vocational rehabilitation referral.

In addition, Hawaii law provides a capital goods excise
tax credit, which is essentially an investment credit of
4% of the cost of equipment placed in service by a busi-
ness in Hawaii, which amounts to a full credit for the
4% General Excise Tax paid on the purchase.  (This will
increase to 4.5% for 1993 through 2002 if a county excise
tax surcharge of 0.5% goes into effect for that period.)
This law is modeled after the federal investment credit
law that was in effect before 1986.