Tax Credits

In today’s society where workforce diversity is of higher value and significance, it makes good business sense for businesses of all sizes and industries to explore all available pool of job applicants in the market. To provide employers an incentive to promote workforce diversity in their hiring efforts, governments at federal and local levels offer tax credits to help private for-profit businesses to reduce tax liability and to save thousands of dollars on income and payroll taxes.

Hire-Ability can help employers be eligible for these tax credits. At Hire-Ability, we will help you identify qualified employees and prepare eligible cases for credit approval. Just one qualified employee from us can help you realize thousands of dollars of tax credits.

You may follow the links below to learn more about the types of hiring tax credits you can be eligible for. Please call any one of our Employment Consultants for more specicific information.

  1. Work Opportunity Tax Credit (WOTC)
  2. Enterprize Zone Hiring Credit (EZHC)
  3. Useful links for tax credit information

WORK OPPORTUNITY TAX CREDIT (WOTC)1

The Work Opportunity Tax Credit (WOTC) is a Federal income tax credit for employers who hire employees from targeted groups. Employers must prescreen their job applicants for tax credit eligibility prior to the day a job is offered. Employees must work a minimum of 120 hours before the tax credit can be claimed. Employers must request WOTC certification within 21 days of the employee's first day of work.

HOW MUCH YOU CAN CLAIM

Employers may claim the Work Opportunity Tax Credit for a total of 2 years.
Employer may carry the tax credit back three years and forward fifteen years.

  • 40% of qualified first year wages up to $6,000 (employee must be retained for at least 400 hours), or
  • 25% of qualified first year wages up to $6,000 (if employee is retained at least 120 hours but less than 400 hours).

Examples:

  1. Assumes the employee is a part-time worker, is paid minimum wage and that his or her annual salary stays the same over 2 years.
    Year Hourly Wage Annual Hours Worked Annual Total Salary % Credit Amount of Credit
    1 $6.75 1,040 $7,020 40% $2,808
    2 $6.75 1,040 $7,020 40% $2,808
    TOTAL TAX CREDIT $5,616
  2. Assumes the employee is a full-time worker, is paid minimum wage and that his or her annual salary stays the same over five years.
    Year Hourly Wage Annual Hours Worked Annual Total Salary % Credit Amount of Credit
    1 $6.75 2,080 $14,040 40% $5,616
    2 $6.75 2,080 $14,040 40% $5,616
    TOTAL TAX CREDIT $11,232

    1Sources: One-Stop-Hiring Tax Credit Shop, Private Industrial Council of San Francisco

CALIFORNIA STATE ENTERPRISE ZONE HIRING TAX CREDITS2

The California State Enterprise Zone (EZ) Hiring Tax Credit is a state income tax credit for employers who hire job seekers from targeted groups. Employers can claim up to $31,605 in tax credits over a five-year period when they hire qualified employees. Employees must perform at least 50% of their work within the boundaries of the Zone. Employers must have an EZ Voucher to claim the credit.

HOW MUCH YOU CAN CLAIM

The EZ provides a five-year declining scale California state income tax credit based on wages paid to eligible employees. Credit can be claimed over a five-year period and employers can claim up to $31,605 per qualified employee.

  • First year: 50% of wages paid
  • Second year: 40% of wages paid
  • Third year: 30% of wages paid
  • Fourth year: 20% of wages paid
  • Fifth year: 10% of wages paid

Credit is based on the lesser of the hourly wage paid or 150% of minimum wage. (The minimum wage is currently $6.75; 150% of minimum wage is currently $10.13.)

Examples:

  1. Assumes the employee is a full-time worker, is paid minimum wage and that his or her annual salary stays the same over five years.
    Year Hourly Wage Annual Hours Worked Annual Total Salary % Credit Amount of Credit
    1 $6.75 2,080 $14,040 50% $7,020
    2 $6.75 2,080 $14,040 40% $5,616
    3 $6.75 2,080 $14,040 30% $4,212
    4 $6.75 2,080 $14,040 20% $2,808
    5 $6.75 2,080 $14,040 10% $1,404
    TOTAL TAX CREDIT $21,060
  2. Assumes the employee is a full-time worker, is paid $12.00/hr and that his or her annual salary stays the same over five years.
    Year Hourly Wage Annual Hours Worked Annual Total Salary % Credit Amount of Credit
    1 $10.13 2,080 $21,070 50% $10,535
    2 $10.13 2,080 $21,070 40% $8,428
    3 $10.13 2,080 $21,070 30% $6,321
    4 $10.13 2,080 $21,070 20% $4,214
    5 $10.13 2,080 $21,070 10% $2,107
    TOTAL TAX CREDIT $31,605
  3. Assumes the employee is a part-time worker, is paid minimum wage and that his or her annual salary stays the same over five years.
    Year Hourly Wage Annual Hours Worked Annual Total Salary % Credit Amount of Credit
    1 $6.75 1,040 $7,020 50% $3,510
    2 $6.75 1,040 $7,020 40% $2,808
    3 $6.75 1,040 $7,020 30% $2,106
    4 $6.75 1,040 $7,020 20% $1,404
    5 $6.75 1,040 $7,020 10% $702
    TOTAL TAX CREDIT $10,530

    2Sources: One-Stop-Hiring Tax Credit Shop, Private Industrial Council of San Francisco

LINKS TO OFFICIAL TAX CREDIT WEBSITE INFORMATION:

WOTC Website information

California State Enterprise Zone Tax Credit