Tax Credit Processing

Tax Credit? What?

You mean they'll give me money back?

Updated on Aug 20, 2018 at 05:33 PM

PayMaster makes sure that our clients receive all of the tax credits that they deserve. Currently, the Affordable Care Act, the WOTC and the Excess FICA Tip Credit are available to qualified companies. PayMaster is constantly monitoring changes in applicable legislation and regulations to ensure compliance.

Workforce Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a Federal tax incentive program to encourage employers to hire and retain employees from specific target groups. These groups include:

Veterans
Recipients of social assistance
Those living in economically distressed communities

The tax credits range in value depending on the category of employee and length of employment. Your company can receive a tax credit of up to $9,600 per new hire.

How does it work?

Although there are several steps, PayMaster can make the process very easy.

The first step is to incorporate IRS Form 8850 into your new hire process. If you use the payroll module of PayMaster HCM, you can host and provide the form to your new employees using employee self service. Those using the HR module of PayMaster HCM can take it a step further and assign it to new hires as a to do item that must be completed as part of a onboarding procedure.

Next, securely send any completed 8850s to PayMaster within 28 days of employee's hire date and we'll take over from there. We will work with the State Workforce Agencies to complete all the paperwork and secure your certificate. We will also monitor your eligibility rates and make suggestions from time to time to increase your credits.

Finally, you may be eligible for additional state and local credits as well as a Federal Empowerment Zone credit if your business is located in a Federal Empowerment Zone and you hire employees from within that zone.

Affordable Care Act (ACA)

If you provide health insurance to your employees and pay more than 50% of the premium, you can qualify for the Small Business Health Care Tax Credit. Up to 35% of the employer paid health insurance premiums can be taken as a tax credit, and by 2014, this credit will go up to 50%. Non–Profit organizations are also eligible for up to 25% credit, increased to 35% in 2014.

The maximum credit is available if your average annual wages are less than $25,000 and you have 10 or less employees. Between $25,000 and $50,000 in annual wages and between 10 and 25 Full Time Equivalent employees the credit gradually phases out.

After the end of each calendar year, PayMaster will provide you with a report indicating your Full Time Equivalent (FTE) employee count and your average annual wage along with any phase out factor, if applicable. These numbers will be used to calculate the credit as determined by the amount of health insurance premium you paid on your employees for the entire year. This credit is taken on your annual federal tax return.

Excess FICA Tip Credit

This credit is woefully underutilized by those in the food and beverage industry, but it shouldn't be. It's a great way to lessen your tax burden. Interested? Our favorite CPA has written a very informative blog about it.