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Q. How does my
company get tax credits?
A. By hiring employees who fit into specific demographic and geographic
groups, your company may be eligible. Identifying those groups is what
MCM does, at no charge to you.
Q. If MCM helps my company
capture tax credits, how does MCM make money? In other words, what's
the catch?
A. MCM is paid only on performance, as a percentage of the credit your
company receives. If your new employees don't qualify your company for
tax credits, we provide the service at no cost. Only when your company
saves money will a bill be generated, based on a small fraction of the
tax credit captured.
Q. Government programs usually
involve a lot of paperwork. Will this take a lot of time and effort on
my part?
A. MCM handles all the necessary paperwork for submitting and receiving
your credits. You simply hire and mail 2 forms that each new hire
completes. The tax credit program is designed to be very easy on your
staff!
Q. We have employees in several
states. Can MCM help us?
A. Yes! MCM can represent companies, large and small, that have
multiple locations in one or many states. Our tax credit specialists
can identify federal and state tax credit programs nationwide.
Q. What if the employee leaves
during the first year of employment?
A. The credit is available for any WOTC qualified person who works at
least 120 hours for a business.
Q. What if the employee works
part-time?
A. The credit is available for both part-time and full-time employees.
The credit percentage is tied to the total number of hours worked and
qualified gross wages.
Q. Can a business use this
credit for current employees?
A. No. WOTC is an incentive to hire new individuals, and the credit is
calculated against wages paid only during the first year an employee
works for an employer (with the exception of Long-term Welfare
recipients). Also, to take advantage of the credit the business must
properly apply within the federally mandated time period.
Q. What is the definition of
qualified wages?
A. Qualified wages are generally wages subject to the Federal
Unemployment Tax Act.
Q. Is there a limit on the
number of employees for which a business can take the credit?
A. There is no limit as to the number of employees who can qualify. An
employer can claim the WOTC tax credit for as many new hires as are
qualified by the WOTC.
Q. What if the Federal tax
liability of the business is less than the total credit amount?
A. As with other business tax credits, unused WOTC amounts can be
carried forward for up to 20 years and carried back 1 year. WOTC is one
of several business credits and generally is subject to the same rules
as other business tax credits.
Q. Can nonprofit organizations
benefit from WOTC?
A. Tax-exempt organizations, other than certain cooperatives, are
ineligible for the credits.
Q. Can a pass-through entity,
such as a partnership or S-corporation, use the credit?
A. WOTC is a general business credit for Federal tax purposes and may
be passed through under the rules similar to other business credits.
Q. Is there a time limit for
taking WOTC?
A. WOTC is not a permanent provision of the tax code and so is
available for individuals who start work by a specified date. A
business owner should check with Mckenzie Chase to confirm that date.
Currently, individuals must start work before August 31, 2011, but the
date is likely to be extended.
Q. Are there any incentives for
hiring residents of an EZ, RC or RRC?
A. Yes. The tax code gives employers a credit (WOTC) against Federal
taxes for hiring residents of an EZ, RC or RRC ages 18 to 39. WOTC also
applies to EZ, RC or RRC residents ages 16 and 17 who are hired for
summer work and is available for the hiring of certain other groups
identified as having difficulty entering the job market.
Q. What are EZ, RC or RRC areas?
A. Empowerment Zones (EZ), Renewal Communities and Rural Renewal
Counties (RRC) are areas targeted for economic stimulus, empowerment
and renewal for federal programs such as the WOTC.
Q. How does the credit affect
the deduction for salaries and wages?
A. A business must reduce the deduction for salaries and wages by the
amount of the credit taken.
Q. Are there special procedures
to formally claim the WOTC tax credit?
A. These procedures are taken care of by Mckenzie Chase at the end of
your tax year. The credit is accounted for on IRS Form 5884 and is part
of the business’s tax filing. The application forms and the
certifications are not filed with the tax return but should be retained
by the business to substantiate the credit.
Contact a tax credit expert at MCM today to schedule your complimentary
consultation.
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