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August 2019

The New York Minimum Wage Tax Credit

New York offers millions of dollars’ worth of tax incentives every year for employers. If your business is in this state, the good news is you may qualify for more than one tax credit that may each add up to thousands. These credits not only aim to boost investment in New York businesses, they also help people who traditionally face employment barriers find work.

A large group of these people are young, low-income earners. The state of New York offers a Minimum Wage Reimbursement Credit that rewards employers who hire young students at minimum wage. Students may be disadvantaged and at-risk as they join the workforce. Sometimes, as they attempt to find employment, they become discouraged due to their lower skillset and inability to commit to full-time work year-round.

Who Qualifies for This Credit?

Employers are eligible to receive this credit if they employ students in New York State. These student workers must:

  • Have been employed beginning on/after January 1st, 2014 and before January 1, 2019
  • Be at least 16 but not yet 20 years of age
  • Be paid at the New York state’s minimum wage During the qualifying period of time, this minimum wage started at less than $9.70 and increased to $11.10 ($10.50 minimum to $13.50 minimum for New York City)
  • Be a student during their period of employment and be able to prove their student status

How Much is the Credit?

In order to calculate how much the credit will be worth for you, you’ll apply a certain tax credit multiplier to the total number of hours worked within the taxable year for which the student worker is paid New York’s minimum wage. The tax multipliers vary based on the year and are as follows:

  • $0.75 for each hour for tax years beginning on/after January 1st, 2014 and before January 1st, 2015
  • $1.31 for each hour for tax years beginning on/after January 1st, 2015, and before January 1st, 2016
  • $1.35 for each hour for tax years beginning on/after January 1st, 2016, and before January 1st, 2019

For example, if you hired a student employee who worked 20 hours a week for 20 weeks in 2019, they’ll have worked a total of 400 hours. This entitles you to a credit of $540.

How Do I Verify My Employees’ Student Status?

In order to prove that you did indeed hire employees who may be eligible for the minimum wage reimbursement, you must verify that the individual was enrolled at an eligible educational institution. You need to retain documentation from the student and keep it in your records so it’s available upon request. Acceptable forms of documentation include:

  • A student ID
  • Current or future course schedules that are officially issued by the school (transcripts)
  • A letter from their school verifying their future or current enrollment
  • Working papers: New York State Department of Labor Student General Employment Certificate-AT-19

What is an Eligible Educational Institution?

These institutions are ones that maintain a consistent curriculum and faculty. They also contain a body of students that is regularly enrolled and in attendance at the location where educational activities are regularly conducted. Examples include:

  • Universities
  • Colleges
  • Secondary schools
  • Vocational, technical, and trade schools
  • Any institution that offers programs of training or education that are meant to prepare students for gainful employment

Institutions that are not eligible include:

  • On-the-job training courses
  • Schools whose courses are only available online
  • Correspondence schools

When able to verify that young employees are indeed students and they are paid the minimum wage, employers can be rewarded. On the other end, young students may find an easier path to employment if companies are incentivized to hire them.

If your business is in New York, exploring the minimum wage tax incentive can improve your company’s financial outlook. The Tax Credit Group can help you find the most current credits available in your state—and help you determine whether your employees qualify for this reimbursement.

What’s the Difference Between a Tax Credit Specialist and a Certified Public Accountant (CPA)?

We here at the Tax Credit Group are tax credit specialists, but we always get a lot of questions about personal and corporate taxes and accounting. It’s understandable. For many people, the words tax and accountants are synonymous and so it’s easy to think that we can specialize in taxes and CPAs specialize in tax credits. But that’s not the case.

What’s a Certified Public Accountant (CPA)?

According to Investopedia, the CPA designation is given to people who are certified by the American Institute of Certified Public Accountants (AICPA). They have met the education and experience requirements set forward by AICPA and have passed an exam.

A CPA has at least a bachelor’s degree, has completed 150 hours of education and has completed at least two years of public accounting experience. He or she has also passed a certification exam and must complete several continuing hours of education every year to maintain his or her certification.

But the key here is that’s what has to happen before a CPA even starts specializing in a field. Even among CPAs, there is a difference. Some of them specialize in audits, making sure a company’s books are in order and there’s no fraud. Some specialize in personal taxes, making sure that people submit the right paperwork to the IRS. Still, others specialize in non-profits, making sure that those non-profits meet the rigid requirements of the state and federal government.

How is a Tax Credit Specialist different?

A tax credit specialist does not have to be a CPA, but it can certainly help.

In most cases, a CPA will likely have a general understanding of the tax code, but he or she may not be specialized in the particular tax code you’re dealing with. And it’s not the fault of the CPA. The tax code is immense. So big in fact, that no one can quite figure out how many pages it is.

To give you an idea, there’s a book called Federal Income Tax: Code and Regulations–Selected Sections (2018-2019) on Amazon that totals 1,776 pages. Mind you, that’s just selected sections.

A tax credit specialist understands the ins and outs of very specific parts of the tax code. This person will understand the nuances of the tax code and know when to push the envelope and when to be cautious.

CPAs and Tax Credit Specialists are not interchangeable

A very lucky few will find a CPA that can specialize in the tax credits they are trying to apply for, but for a majority of people who are looking for business tax credits they will need both.

A CPA can apply tax credits to your taxes, however a tax credit specialist will be the one to find the tax credits, tell you how to fulfill the requirements necessary for you to qualify for those credits, and then make sure that you and your CPA have all the paperwork and forms necessary to apply those tax credits to your taxes.

Do not cut corners and pick one over the other. You could end up leaving money on the table.

WOTC Piggy-Back Credits: Do They Apply to You?

WOTC, the Work Opportunity Tax Credit, is a point-of-hire tax incentive provided by the federal government that rewards businesses for hiring employees from certain target groups. These groups of people constantly face employment barriers and have traditionally held high unemployment rates. If you hire an applicant who qualifies for WOTC, you may receive a reduction to the amount of taxes you owe.

As determined by the IRS, target groups include:

  • Qualified Veterans
  • Unemployed Veterans
  • Long Term Unemployed
  • Long Term Family Assistance Recipients
  • Food Stamp Recipients
  • Supplemental Security Income (SSI) Recipients
  • Welfare Recipients
  • Summer Youth
  • Ex-Felons
  • Designated Community Residents
  • Vocational Rehabilitation

The Work Opportunity Tax Credit is calculated based on your employees’ wages and on the number of hours they work. It’s important to understand that existing employees cannot be screened for WOTC, since it’s offered as a point-of-hire credit. Only new applicants may be screened, and they cannot have worked for you before.

Depending on where you are located, your state likely will offer tax credits to encourage businesses to hire employees from, and invest in, the target groups that are listed above. If you hire individuals from any one of these groups, you may be eligible to receive what is known as a “WOTC Piggy-Back Credit”. Employees or applicants who qualify for WOTC may also qualify for these Piggy-Backs; you may be able to get State credit using the same screening process that is used for WOTC—hence the name for these additional credits.

States that have WOTC Piggy-Back Credits include:

  • Arizona
  • California
  • Louisiana
  • New Mexico
  • New York
  • North Dakota
  • South Carolina
  • Washington

These State credits can range from several hundred dollars up to $35,000 per qualifying employee (up to 40% of first year wages for certified workers). Currently, WOTC is authorized for any new hires that have occurred after December 31st, 2014, and before January 1st, 2020. Any unused credits may be either carried back one year or carried forward for 20 years.

Businesses can claim billions of dollars each year in tax credits under the federal Work Opportunity Tax Credit and the accompanying Piggy-Back Credits. Unfortunately, however, it often happens that employers hire individuals who qualify for WOTC (and additionally, WOTC Piggy-Back Credits) and neither the employee nor employer know it.

If you need help identifying the WOTC Piggy-Back Credits that are available to you due to your location and would like to receive the maximum tax credit possible, give Tax Credit Group a call; we’re here to help.

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