Your reasonable efforts are rewarded with the Work Opportunity Tax Credit.
And, thanks to new legislation, the rules are now in place for a more extended period than typical.
If you need to hire employees for your firm, you should be aware of this tax break that reduces your taxes dollar for dollar.
Presume your company recruits someone from a specific demographic. In that situation, you can claim a portion of the individual's wages as part of the federal Work Opportunity Tax Credit (WOTC).
A Summary of the Credit
The credit usually equals 40% of a qualifying employee's qualified first-year pay, up to a maximum wage amount of $6,000. This equates to a credit of up to $2,400 (40 percent x $6,000).
Of course, some employees refuse to exercise. The credit rate for an employee who completes at least 120 but fewer than 400 hours of service is reduced to 25% of eligible first-year compensation. This equals a maximum credit of $1,500 (25 percent of $6,000).
Employees Who Qualify
Your new recruit must be certified as a targeted group member by the appropriate State Workforce Agency to be eligible (SWA). As the employer, you have two options.
Congress enacted the Consolidated Appropriations Act, 2021, another assistance package in response to the pandemic, in late December 2020. $22.7 billion for colleges and universities is one of the many provisions included.
Effective as of the 2023-2024 school year, the law achieves a long-held bipartisan priority of streamlining the FAFSA process.
For example, the measure reduces the overall number of questions, improves the income protection allowance for parents and students, allowing more hidden income from the calculation, and raises the income threshold to qualify for the simplified needs test, a FAFSA calculation that doesn't count family assets. It increases the number of students who are eligible for Pell Grants.
Let's Chat and discover how much you should be saving for college regularly.
When you understand the rules for business mileage, you'll be able to make better decisions.
Take, for example, Mahali. He deducted 30% of the cost of her SUV before she learned the mileage rules. She deducted 92 percent after learning the rules.
Consider Thando, who lost almost all of her vehicle deductions due to an IRS audit.
Follow Mahali's example. Here's how to do it:
Please do not hesitate to contact me if you have any questions about your business vehicle.
If you don't have an exception to apply, you have been subject to lawmakers limits on your tax deductions for business meals since 1986, for the first time, to 80%, now to 50%.
On December 27, 2020, however, lawmakers concluded to allow a new, interim 100% business meals allowance for 2021 and 2022 to assist the restaurant industry through the COVID-19 pandemic.
You have to get your food or drinks from a restaurant in order to meet the criteria for the 100% deduction.
The law requires only that the restaurant provide the food and beverages. You don’t have to pay the money directly to the restaurant. For example, you qualify for the 100 percent deduction if you order a restaurant meal that’s delivered by Uber Eats or Grubhub.
Your deductible business meals must be tax code Section 162 ordinary and necessary business expenses, and they must not be subject to disallowance under tax code Section 274.
You must be present at the business meal, and you must provide the business meal to a person with whom you could reasonably expect to engage or deal with in the active conduct of your business, such as a customer, client, supplier, employee, agent, partner, or professional advisor, whether established or prospective.
Remember, to qualify for the 100 percent deduction, you need a restaurant. The IRS has recently provided guidance on what is and is not a restaurant. Make sure you know these prior to trying this tax strategy!
In general, the 50 percent limitation applies to business meals from the sources listed above.
The restaurant creates the 100 percent deduction.
If you would like to discuss your business meal activities, please call me on my direct line at 262-358-8297.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.