News Update

Friday, November 2, 2007
Tax credits can help you recover capital for your organization’s initiatives.  Many of us who grew up in human resources recognize the value of some initiatives but find difficulty in getting budgets approved.  Finding a creative way to offset these costs can enhance our productivity while demonstrating our commitment to the bottom line.  One such method is utilizing federal employment tax credits. 

It stands to reason that tax credits designed to reward our efforts to hire individuals designated for employment tax credits could legitimately be “ear marked” for human resource initiatives such as improvements in recruiting, benefits, technology, incentives or just simply as our contribution to the bottom line.

The purpose of these tax credits is to provide incentives to hire employees with barriers to employment.  These barriers may be a simple result of the individual’s participation in welfare or a disability or even a felony conviction.  The bottom line is that statistics indicate there is no increased turnover among this group according to an article published in Social Service Review, June2007, Vol. 81, Issue 2, pp.317-342, 26p.

Though most of us are vaguely aware of tax credits and some of us have even utilized some of them, we remember the process as cumbersome and generally not worth the effort.  Well, a lot has changed.  Though the General Accounting Office still estimates that less than 1% of businesses take advantage of tax credits, those that do are demonstrating a real prowess in making it a part of their strategy.  Certainly a lot of the Fortune 500 companies take advantage of them.  Well, you say you’re not a Fortune 500… There is good news.  The laws have changed and, though credits cannot be utilized for a company in a Net Operating Loss (NOL), they can be used for companies filing Alternative Minimum Tax (AMT) and those that are profitable can use them.  In addition, if you are a S corporation or a LLP, LLC., then these credits are reflected as deductions in the tax liability for your owners on their K-1.  Also, for credits that cannot be used in the tax year, they are recorded, and can be carried forward for up to 20 years.

Statistically, one out of every seven employees, or about 15% of your employee population, will qualify for one form of tax credit.  These federal credits can be for as much as $9,000 per employee.  Additional state credits can add as much as $35,000 in credits from some states and some of these credits even offset an employee’s state withholdings. By cresting a strategy to target this group in your recruiting efforts, you can increase the available tax credits while pursuing an important social agenda.

Given the low number of companies that take advantage of these tax credits, they can become a distinct strategic advantage for you.  By utilizing the service of a contingency-based tax credit processor, you can eliminate the risk and maximize the discovery of credits.  Making a capital recovery strategy part of your business plan makes sense.

Return to News