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Payroll & Taxes

How an HR Services Company Can Help Identify Tax Credits

Dana Spinello, CPA
by Dana Spinello, CPA on August 15, 2019

Did you know your company may be eligible to receive a tax credit? Which types of businesses qualify? Which ones don’t? How do you go about applying for a tax credit? How do you claim it if you qualify? An HR Services company, like a Professional Employer Organization (PEO) can help employers identify tax credits, and even track them on a client’s behalf.

One of the most common tax credits is the Work Opportunity Tax Credit (WOTC). This program is designed to assist employers with reducing federal income tax liability. In an effort to move people from welfare to GettyImages-504572064work, the WOTC was specifically enacted by the federal government to promote the hiring of certain targeted demographic groups that typically have challenges gaining employment.

Some of those groups include:

  • Veterans
  • Long-term unemployed
  • Ex-felons
  • Minors
  • Food-stamp recipients

About $1 billion in tax credits are claimed each year under the WOTC program, according to the Department of Labor (DOL).

WOTC Qualifications

While most businesses are eligible to claim the WOTC, those most likely to benefit are those that have an expanding workforce or experience high turnover. WOTC hires must work at least 120 hours in the first year of employment for the employer to qualify to claim the tax credit. 

When employees work 400 hours or more in a given year, the credit grows. Therefore, the longer employers retain employees who meet the criteria, the more credit they receive.

Eligible wages vary from $6,000 to $24,000 depending on the category. A long-term unemployed veteran with a disability reflects the greatest credit potential at $9,600.

How FrankCrum can Help

Recently, FrankCrum, a Florida PEO serving clients nationwide, helped a client apply for and receive the WOTC. The client, which has seasonal employment spikes, received over $4,500 in tax credits on just under $14,000 in employee wages. 

Here’s how it works:

  • FrankCrum’s Employment Tax Credit program managers work with clients to identify potential incentives and eligible candidates, and then document the requirements and secure the credits.
  • Some credit programs require that employees complete the necessary paperwork in certain periods, such as on or before the day of a job. FrankCrum provides the paperwork to facilitate this data collection.
  • FrankCrum then researches and establishes whether the employee is eligible for any credits, free of charge.
  • FrankCrum helps employers stay compliant by documenting an audit trail.
  • Once an applicable credit has been identified, a fee of 15% of the dollar amount of the tax credit is due.

For more information about FrankCrum’s tax credit services, contact 877-695-6207.

Payroll Tax Changes 2020

Dana Spinello, CPA
Dana Spinello, CPA

Dana is the Director of Tax & Unemployment at FrankCrum. Dana has been with FrankCrum since 2010 and oversees tax compliance and unemployment benefit administration. She has been a Certified Public Accountant since 2002. She first realized her aptitude with accounting when she chose to play with her mother’s adult learning accounting class material at age seven. When she’s not working, Dana enjoys traveling, true crime, and reading historical novels.