Cream of the Crop 1/Cream of the Crop 1.iso/BUSINESS/SBA62.ARJ/FSBA.EXE/F250.SBE

Text File | 1992-04-30 | 6KB | 131 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 disadvan-
taged category person, he or she must be certified as such by a desig-
nated state employment security agency and the certification must be
received 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 appli-
cants 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 people 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 information if they
qualify.  Remember, if it appears the new hire qualifies, you must re-
quest a certification from the state employment security agency at
least a day BEFORE employment 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 certain handi-
      capped individuals who have completed rehabilitation programs.

    . ECONOMICALLY DISADVANTAGED YOUTHS.  People between ages 18 and
      22 who are certified as being members of economically disadvan-
      taged 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 employee, 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 cred-
it 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 IS 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 Devel-
opment 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 credit 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 employee, earned
over a 2-year period.  The state jobs credit is NOT allowed as an off-
set against the California alternative 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 "Enterprise Zones" and "High-
Density Unemployment Areas" that have been designated in certain parts
of the state that are economically depressed.  Employers may also claim
a 50% credit (up to $600 per dependent) under a plan providing child
care for employees.

@CODE:OF
@CODE: HI
@CODE:NF
Hawaii law provides a capital goods excise tax credit, which is essen-
tially an investment credit of 4% of the cost of equipment placed in
service by a business in Hawaii.  (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 that was in effect before 1986.

In addition, 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.