Tax Credits for Summer Youth Employees

Updated: May 5


While it's going to cost your small business to hire this summer, at least the wages are deductible on their annual returns. Even better, if you hire workers from one of several “target groups,” a portion of the wages may qualify for a special tax credit.


This credit is currently known as the Work Opportunity Tax Credit (WOTC) and now available until December 2025. In addition to the regular credit, a business may be eligible for a special “summertime” credit for hiring certain disadvantaged youths.


How does the credit work? Generally, it is equal to the worker’s first-year wages up to $6,000 if he or she works at least 400 hours during the year, for a maximum credit of $2,400 per worker. For disabled veterans, the credit may be claimed for the first $24,000 of wages, for a maximum credit of $9,600 per worker.


There is no limit on the number of credits a business can claim. For example, suppose your client hires five eligible workers this year who each qualify for a $2,400 credit, As a result, the business may claim a total credit of $12,000 – a dollar-for-dollar reduction of its 2018 tax bill.


Currently, there are ten target groups eligible for the regular WOTC. See www.swainconsultingllc.com for all information related to target groups.


A business may also claim the summertime credit for hiring youths aged 16 or 17 who reside in an empowerment zone or enterprise community.


Is that all there is to it? Not quite. An employer must obtain certification that an individual is a member of the targeted group before it can claim the WOTC for him or her.


Employers are instructed by the IRS to file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after the eligible worker begins work.


Bottom line: You might need help navigating these tricky tax waters. But the payoff for hiring workers this summer will be well worth the time and effort.


Contact Stevie Swain for more information. Call 513-818-1753 ext. 4.

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