Payroll-Based Tax Credits

All U.S. taxpayers with employees paid via Form W-2 are eligible for specific “payroll-based” tax credits. Each tax year, hundreds of millions of dollars in potential tax credits are unclaimed from the U.S. Treasury.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is an often-overlooked payroll-based tax credit. Claiming the tax credit, however, isn’t easy. To claim the credit, the taxpayer has to have hired a qualified employee from one of 10 target groups, and specific forms must be filed with the state’s WOTC coordinator within 28 days of the hire date. The credit can range from $2,400 to $9,600 per employee, depending on which target group the qualified employee belongs to.

Marcum’s Tax Credit and Incentives (TCI) Group provides all WOTC processing, vouchering and management to capture the credits. The TCI Group uses MarcumSecure – an encrypted information transfer system—ensuring data sent between Marcum and its clients are protected.

A Work Opportunity Tax Credit Success Story

Total new WOTC hires: 10
Total average WOTC per year: $2,400
Total current annual tax credit: $24,000

Federal Empowerment Zone Tax Credit

Created in 1996, the Federal Empowerment Zone (FEZ) Tax Credit can be claimed in the 40 U.S. Federal Empowerment Zones. The FEZ credit has a history of expiring, being extended retroactively, and extended again.

Most recently, the FEZ expired at the end of 2017 and is still awaiting extension. Amended return opportunities may be available to some clients for the 2016-2017 tax years. The credit amount is equal to 20% of the first $15,000 in wages paid, capped at $3,000 per employee, per year. The employer and employee must reside within the Empowerment Zone, and the employee must work in the FEZ. Certain businesses such as golf courses, gaming venues, and liquor stores are not eligible for this tax credit.

Marcum’s TCI group can determine whether your business is located in an FEZ and estimate your refund potential. Marcum’s TCI group manages the entire process to capture all qualified tax credits for you and your business.