The Work Opportunity Tax Credit (WOTC) is a long-standing income tax benefit
that encourages employers to hire designated categories of workers who face
significant barriers to employment. The credit, usually claimed on Form
5884, is generally based on wages paid to eligible workers during the first
two years of employment.
To qualify for the credit, an employer must first request certification by
filing IRS Form
8850 with the state workforce agency within 28 days after the eligible
worker begins work.
There are now 10 categories of WOTC-eligible workers. The newest category,
added effective Jan. 1, 2016, is for long-term unemployment recipients who had
been unemployed for a period of at least 27 weeks and received state or federal
unemployment benefits during part or all of that time. The other categories
include certain veterans and recipients of various kinds of public assistance,
among others.
The 10 categories are:
- Qualified IV-A Temporary
Assistance for Needy Families (TANF) recipients
- Unemployed veterans,
including disabled veterans
- Ex-felons
- Designated community
residents living in Empowerment Zones or Rural Renewal Counties
- Vocational
rehabilitation referrals
- Summer youth employees
living in Empowerment Zones
- Food stamp (SNAP)
recipients
- Supplemental Security
Income (SSI) recipients
- Long-term family
assistance recipients
- Qualified long-term
unemployment recipients.
Eligible businesses claim the WOTC on their income tax return. The credit is
first figured on Form 5884 and then becomes a part of the general business
credit claimed on Form
3800.
Though the credit is not available to tax-exempt organizations for most
categories of new hires, a special rule allows them to get the WOTC for hiring
qualified veterans. These organizations claim the credit on Form
5884-C.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
Taxpayers with children may qualify for certain tax benefits. Parents should
consider child-related tax benefits when filing their federal tax return:
- Dependent. Most of the time,
taxpayers can claim their child as a dependent. Taxpayers can generally deduct $4,050 for each qualified dependent. If the
taxpayer’s income is above a certain limit, this amount may be reduced.
- Child Tax Credit. Generally, taxpayers
can claim the Child Tax Credit for each qualifying child under the age of
17. The maximum credit is $1,000 per child. Taxpayers who get less than
the full amount of the credit may qualify for the Additional Child Tax
Credit.
- Child and Dependent Care
Credit. Taxpayers may be able to claim this credit if they paid for the care of
one or more qualifying persons. Dependent children under age 13 are among
those who qualify. Taxpayers must have paid for care so that they could
work or look for work.
- Earned Income Tax
Credit. Taxpayers who worked but earned less than $53,505 last year should look
into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify
with or without children.
- Adoption Credit. It is possible to claim
a tax credit for certain costs paid to adopt a child.
- Education Tax Credits. An education credit can
help with the cost of higher education. Two credits are available: the American
Opportunity Tax Credit and the Lifetime
Learning Credit. These credits may reduce the amount of tax owed. If
the credit cuts a taxpayer’s tax to less than zero, it could mean a
refund. Taxpayers may qualify even if they owe no tax.
- Student Loan Interest. Taxpayers may be able
to deduct interest paid on a qualified student loan. They can claim this
benefit even if they do not itemize deductions.
- Self-employed Health
Insurance Deduction. Taxpayers who were self-employed and paid for health
insurance may be able to deduct premiums paid during the year.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
The Child Tax Credit is a tax credit that may save taxpayers up to $1,000 for each eligible qualifying child. Taxpayers should make sure they qualify before they claim it. Here are five facts from the IRS on the Child Tax Credit:
1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:
- Age. The child must have been under age 17 on Dec. 31, 2016.
- Relationship. The child must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother or half-sister. The child may be a descendant of any of these individuals. A qualifying child could also include grandchildren, nieces or nephews. Taxpayers would always treat an adopted child as their own child. An adopted child includes a child lawfully placed with them for legal adoption.
- Support. The child must have not provided more than half of their own support for the year.
- Dependent. The child must be a dependent that a taxpayer claims on their federal tax return.
- Joint return. The child cannot file a joint return for the year unless the only reason they are filing is to claim a refund.
- Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Residence. In most cases, the child must have lived with the taxpayer for more than half of 2016.
2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate a taxpayer’s credit depending on their filing status and income.
3. Additional Child Tax Credit. If a taxpayer qualifies and gets less than the full Child Tax Credit, they could receive a refund, even if they owe no tax, with the Additional Child Tax Credit.
Because of a new tax-law change, the IRS cannot issue refunds before Feb. 15 for tax returns that claim the Earned Income Tax Credit (EITC) or the ACTC. This applies to the entire refund, even the portion not associated with these credits. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS expects these refunds to be available in bank accounts or debit cards at the earliest, during the week of Feb. 27. This will happen as long as there are no processing issues with the tax return and the taxpayer chose direct deposit.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
