Tax Credits

There's one business rule that everyone seems to agree upon: When you keep your operating costs down, you have greater room for profit. Unfortunately, most businesses need to spend money on office supplies and the like, but there are other ways to reduce costs without compromising on quality.

An excellent strategy is to participate in the Work Opportunity Tax Credit (WOTC) or Welfare to Work (WtW) programs. In Humboldt County, where the economy has been slow to rebuild, a large number of applicants qualify for these programs.

The Specifics

The programs provide employers up to $8500 in federal tax credits for hiring job seekers from the following programs (provided that they qualify):

  • Food Stamp recipients, ages 18 to 24
  • Veterans who receive food stamps
  • Referrals from the California Department of Rehabilitation
  • Recipients of Aid to Families with Dependent Children (AFDC) or Temporary Assistance to Needy Families (TANF)
  • Recipients of Supplemental Security Income (SSI)
  • Long-term recipients of AFDC or TANF (WtW Tax Credit only)
  • Economically disadvantaged ex-felons hired within a year after conviction or release from prison

Through these programs, employers always make their own decisions about who to hire and never have an obligation to hire someone whom is not qualified for the position. Basically, the intent of the programs is to serve employers and applicants equally, so that a deserving applicant is given a chance, and a willing employer is rewarded for participating. The added bonus for employers is that you receive not only an excellent addition to your staff, but a tax break that will help cut expenses, both of which contribute to the health and success of any business.

Qualifying for the Credit

In order to receive the tax credit for either of these programs, you have to make sure that the employee in question is qualified to participate. You can do this by submitting the short form 8850 to the Employment Development Department (EDD). This form must be completed, signed, and dated by both the employer and the prospective employee before a job offer is actually made. You need to turn the form in to EDD no later than the 21st day after the applicant begins work.

To make things easier, you might want to attach the 8850 form to your regular job application, and ask all applicants to fill it out (though applicants cannot be required to fill it out). If a job seeker tells you they have a "Conditional Certification" of eligibility from the State Employment Development Department, they will qualify for the program in question; however, you still need to submit the 8850 form as you normally would.

For more information on these Tax Credit programs and/or to obtain the Form 8850, simply contact the local EDD office (445-6532) or visit the Employment Development Department's Tax Credit web site.

Eureka businesses may qualify for additional tax credits if they are located in the established Enterprise Zone. Visit the Eureka Redevelopment Agency's website for information about this tax-credit program.