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WOTC Tax Credits

Changes Making it Easier for Veterans to Pursue Degrees in STEM Fields

For years now, military veterans studying under the GI Bill have studiously avoided degrees in Science, Technology, Engineering, and Mathematics (STEM) because there’s simply not enough money to make it happen. The Post-9/11 GI Bill covers 36 months of tuition, but education to earn a degree in a STEM field typically takes longer than that, especially for veterans who have to worry about their families along with their education.

That’s now changing.

SB 153 Supporting Veterans in STEM Careers Act Becomes Law

The most recent change is the signing of SB 153. On February 11, 2020, President Donald Trump signed the bill into law. One of the key points of the bill is that it allows veterans to be eligible for some National Science Foundation (NSF) programs. The NSF will in turn “…encourage veterans to study and pursue careers in STEM and computer science in coordination with other federal agencies that serve veterans, and submit a plan to Congress for enhancing veterans outreach.”

The bill will also make certain scholarships, fellowships, masters programs and grants available to veterans pursuing degrees in the STEM field.

The bill is just another way the U.S. government is trying to make degrees in STEM fields more accessible to veterans without the financial burden that often comes with spending extra time in college to pursue those degrees.

Forever GI Bill

The federal government is also doing what it can to make sure that veterans are aware of the programs already in existence. In 2018, the Forever GI Bill was created in part to help extend GI Bill benefits to veterans pursuing degrees in STEM fields.

The U.S. Department of Veterans Affairs has a full breakdown of all the adjustments under the Forever GI Bill here, but one of the highlights is that qualifying veterans can apply for up to nine months more of tuition coverage.

They can do that through the Edith Nourse Rogers Science Technology Engineering Math (STEM) Scholarship. Students who have used up most or all of their Post-9/11 GI Bill benefits can apply for up to nine months of additional tuition or $30,000. The scholarship is designed for veterans pursuing an undergraduate STEM degree or graduates with a STEM degree who are now pursuing a teaching degree.

Nonprofit Help

There are also some nonprofits specifically designed to help veterans with the transition from military life back to education. Groups like the Student Veterans of America offer advice for military members continuing education as well as local support groups.

5 Ways Volunteering Can Help Ex-Felons Get a Job

When it comes to getting a job, it can be tough for ex-felons. Even though they’ve served their time, their records can follow them into the job market. Unless an employer is willing to take a chance on them, they can be unemployable.

But there may be a way to increase their odds of getting hired. Through volunteering.

Volunteering Improves Skills

Volunteering can help ex-felons improve the skills they have and develop new skills. Volunteers have the opportunity to practice the skills they have and try new things usually in a low-pressure environment. Employers are never going to pass on hiring someone just because they know too many things.

Volunteering Helps You Meet New People

It seems like everyone knows a guy who knows a guy who might have a job opening. That’s great in theory, but sometimes that circle of friends gets exhausted pretty quickly.

Volunteering is a great way to get out there and meet a whole new circle of friends and that new connection may just lead to a new job.

Volunteering Offers Proof Through Hard Work

For ex-felons especially, it can be difficult to prove to a potential employer that they are worth the risk. However, through volunteering, an ex-felon has the opportunity to prove that he or she is reliable, respectful, and hard-working. When an employer sees this, he or she is much more likely to take a chance and offer a paid position.

As the adage goes, the proof is in the pudding.

The Psychological Benefit of Volunteering

Don’t underestimate the psychological benefit of volunteering. It can be mentally trying to hear rejection after rejection. Studies have shown that volunteering helps lift spirits and make people feel needed.

According to HelpGuide.org, volunteering helps you counteract the effects of stress, anger, and anxiety. It helps you combat depression; it increases your self-confidence and your sense of purpose.

Volunteering Helps Prevent Recidivism

Along with the mental health aspect of volunteering, there’s also another positive that comes out of it. According to the site Good Hire, volunteering curbs criminal thinking. “When a former offender understands the concept of ‘giving back’ through volunteering, that goes a very long way towards changing negative thought patterns,” the site says.

Tips for Volunteering

Volunteering isn’t just something to do. Like a job search, ex-felons should put thought into where they want to volunteer and why. Here are some tips for ex-felons considering the volunteer route.

  • Choose a volunteer opportunity that interests you. You’re far more likely to work hard and give your best effort if you like or believe in what you’re doing.
  • Treat your volunteer work like paid work. Show up on time, pay attention, and stay off your phone. Show your managers and anyone else who sees you what it would be like to work with you if you were paid for your work.
  • Use your skills and knowledge. Think of this as a long, drawn-out job interview. You want to impress. If you have a skill that can impress, use it.

Why the Earned Income Tax Credit (EITC) May Be the Tax Credit Your Employees are Missing

In 2018, the tax code was changed and many of those changes dealt with the Earned Income Tax Credit (EITC). For higher wage earners, these changes weren’t helpful. For low wage earners, the changes have meant smaller tax payments and sometimes even refunds.

If you’re a company that takes advantage of the Work Opportunity Tax Credit (WOTC) then odds are you have one or more employees that could take advantage of the 2018 changes to the EITC. But most of your employees may not know that’s an option.

What is the Earned Income Tax Credit?

The very first line on the IRS webpage says, “The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income…EITC reduces the amount of tax you owe and may give you a refund.”

To qualify for the EITC, you must earn income by working for someone or by running or owning your own business. The IRS has a whole list of questions that will help you determine if you qualify for the EITC. You can find it here.

The maximum income you are allowed to earn and still qualify for the EITC will vary depending on whether you’re married or single and how many children you claim as dependents. There’s a full table here.

Why employees need to get new advice about the Earned Income Tax Credit every year

The one thing employees need to know is just because they qualified for the EITC last tax season, it does not mean that they automatically qualify for the EITC this tax season. By the same token, just because they didn’t qualify last tax season, they could qualify this tax season.

Several life situations can disqualify an employee from the EITC or qualify an employee that did not qualify before, such as:

  • A new job;
  • A change in the spouse’s employment’;
  • Unemployment;
  • A change in marital status;
  • Dependent children becoming adults.

If one or more of these things change, then the employee can move into or out of the tax bracket that allows him or her to take advantage of the EITC.

How can an employee find out if they qualify for the Earned Income Tax Credit?

If the IRS paperwork is too confusing, and it can be, the IRS has other ways to help low-income earners get tax advice. The IRS website has a search tool to help people find free tax help. In many instances, there are translators on-site for the key languages such as Spanish, Chinese, French, Tagalog, and Vietnamese.

You can find the locator tool here.

Be careful offering tax advice to employees

Lastly, a disclaimer to keep you out of legal trouble.

You need to be very careful when talking about taxes with your employees. While you may be business savvy and have the answers they are looking for, unless you’re a licensed tax professional you cannot give tax advice.

You cannot advise an employee to do something or not do something financially, even if it’s in his or her best interest.

You also cannot help him or her fill out any tax forms. Once again, you are not a licensed tax professional.

What you can do is make employees aware of some of the opportunities available to them and allow them to look into it on their own.

Top Franchises for Military Veterans and Ways to Get Started

For many military veterans, the idea of finding a civilian job can be a scary thing. It’s a major change from the years they spent in service to our country. For some veterans, the idea of putting those leadership skills to good use as a small business owner is much more appealing. Thankfully, the federal government and some of the nation’s biggest companies want to make it easy for veterans to do just that.

Top Types of Franchises for Military Veterans

Entrepreneur.com takes the time to look at franchises every year and determine which ones are trending in the right direction and which ones aren’t worth the time. The company’s editorial team evaluates franchises overall but also creates a special list just for military veterans.

The team looks at things like discounts offered to veterans, help and training offered, and company health when determining the best franchises for veterans looking to own their own businesses.

Below are some of the key industries at the top of Entrepreneur.com’s list.

Travel Agencies

According to Entrepreneur.com, one of the best types of franchises for veterans to own is a travel agency. The site names Dream Vacations as it’s number one franchise for veterans. Dream Vacations offers 20 percent off the franchise fee for veterans and waives the training fee. It also helps the veteran with marketing assets. Startup costs are also relatively reasonable.

Another travel agency making the list is Cruise Planners.

Premium Tool Sales

The next few spots on Entrepreneur.com’s list include premium tool retailers Snap-on Tools, Matco Tools, and Mac Tools. All three companies offer discounts on initial inventory so veterans can get the business started on the right foot.

Auto Repair

Entrepreneur.com says companies like Precision Tune Auto Care and Grease Monkey are ideal for veterans, especially ones that worked in a mechanic role while serving. Both companies offer discounts on franchise fees for veterans as well as reduced royalties for the first few years in business.

Restaurants/Food Services

Also making the list, several restaurants and other food providers. Captain D’s Seafood Kitchen offers veterans 50 percent off the franchise fee and a reduced royalty for the first year. Meanwhile, Baskin-Robbins will waive the fee for the first franchise and offer a reduced royalty fee for the first five years.

Gyms

Another industry making the top 25 on Entrepreneur.com’s list, athletic gyms. Anytime Fitness offers a discounted franchise fee to veterans, while Crunch Fitness offers 20 percent off franchise fees and royalties when you purchase three or more gyms.

Getting a Veteran Run Franchise Started

Starting a franchise is much more than just determining that you want to start a franchise. U.S. Veterans Magazine has an article about what you need to think about and consider as you’re contemplating starting a franchise as well as some questions that you need to ask yourself and your family.

Funding a Veteran Run Franchise

You’ll also need to think about funding. Unless you’re independently wealthy, odds are you’ll need some financing help to get your business off the ground.

The Small Business Administration offers guaranteed loans for veterans and training to help new small business owners get started. You can find out more about those resources here.

There are also special funding options for disabled veterans through the Small Business Administration.

Organizations like StreetShares Foundation offer support to veterans starting their own businesses, while the Hivers and Strivers Angel Fund is specifically aimed at helping military academy graduates get their small businesses off the ground.

Voting Rights for Felons – Where Each State Stands Heading into the 2020 Presidential Election

As the vote for the next President of the United States nears, the disenfranchisement of America’s felons is once again making headlines.

According to NBC News, 6.1 million Americans were unable to vote in 2016—the last time Americans elected a president—even though they had served their time and were now free from prison. This spotlight on disenfranchised felons prompted multiple states to reassess their voting laws in the past four years and consider reinstating the voting rights of felons.

The National Conference of State Legislatures has a great in-depth breakdown of how each state distributes its voting rights to ex-felons, but you can also read below for more details.

States where felons never lose their voting rights

In two states, Maine and Vermont, felons never lose their voting rights. That means even from prison, felons are allowed to vote.

States that automatically restore a felon’s right to vote after release

16 states and the District of Columbia will automatically restore a felon’s right to vote once they are released from prison, these states are:

  • Colorado
  • District of Columbia
  • Hawaii
  • Illinois
  • Maryland*
  • Massachusetts
  • Michigan
  • Montana
  • Nevada
  • New Hampshire
  • North Dakota
  • Ohio
  • Oregon
  • Pennsylvania
  • Rhode Island
  • Utah

*In Maryland, there is an exception. Anyone who is convicted of buying or selling votes will not receive his/her right to vote back unless he/she is pardoned by the state’s governor.

Lost until parole and/or probation is complete

In 21 states, felons receive their voting rights back only after they complete their parole and/or probation; they are:

  • Alaska
  • Arkansas
  • California**
  • Connecticut
  • Georgia
  • Idaho
  • Kansas
  • Louisiana
  • Minnesota
  • Missouri
  • New Jersey
  • New Mexico
  • New York***
  • North Carolina
  • Oklahoma
  • South Carolina
  • South Dakota
  • Texas
  • Washington
  • West Virginia
  • Wisconsin

**In 2016, legislators in the state of California voted to allow inmates in county jails the ability to vote. Felons in state or federal prison must still wait until their parole and/or probation is complete before their ability to vote is restored.

***In New York the Attorney General’s website says that felons must still wait until their parole has expired, they have been pardoned or their maximum sentence has expired. According to the Brennan Center, in 2018, Governor Andrew Cuomo started using his pardon power to give felons released from prison the right to vote.

All other states

In the rest of the states, a felon’s voting rights are lost until the sentence is complete. In some cases, there is also a waiting period after the completion of the sentence. Some of the states are trying to adjust their laws to allow some felons voting rights, but the changes vary from state to state.

Alabama

In Alabama, whether or not a felon is allowed to vote after release depends on the crime for which he/she was convicted. For example, felons who have committed dangerous crimes like murder or rape cannot vote unless they receive a full pardon from the Board of Pardons and Paroles.

Alabama has always required felons who have committed crimes of moral turpitude to re-apply for the right to vote. However, until 2017, the state did not define what was considered moral turpitude and what was not. The state has now defined the 47 crimes that are considered crimes of moral turpitude.

Felons who have committed any other crimes will automatically have their voting rights restored when they are released from prison and simply need to re-register to vote.

 

The ACLU of Alabama has more details on Alabama’s voting laws regarding felons.

Arizona

According to the ACLU in Arizona, Arizona will automatically restore the voting rights of a first-time offender, provided the offender completes probation and pays any owed fines or restitution. Felons who have committed two or more felonies may also receive their voting rights back, but there are more requirements that they will have to meet before those rights are restored.

Delaware

According to the website Nonprofit Vote, most felons in Delaware automatically receive their voting rights back after they complete their sentence, parole, and probation. People who commit murder, bribery or a sex offense permanently lose their voting rights.

Florida

The court system is currently fighting over what is required to allow felons released from prison the right to vote. Last year, the legislature passed a bill that would require felons to pay off all court fees and fines before their sentence was considered complete. They would not receive their voting rights back until the sentence was complete. However, critics took the bill to court calling it a “poll tax”. In October, a U.S. District judge placed a preliminary injunction on the bill. (Source: NBC News)

As of now, felons who have served their sentence can vote if all court fees and fines are paid, but that could change if the judge’s ruling is challenged.

Iowa

In Iowa, anyone convicted of a felony permanently loses the right to vote or hold public office unless they apply for and are granted the restoration of their voting rights. The state’s governor is currently working to change the state constitution to allow felons the right to vote once they have been released from prison but has so far been unsuccessful.

Kentucky

According to the Kentucky Department of Corrections, anyone who has been convicted of a felony loses the right to vote or hold public office. They can apply to have their civil rights restored with the Governor of Kentucky if they have their Final Discharge papers from parole or their sentence has expired. Applicants cannot be under felony indictment, have pending charges or owe any fines or restitution.

Mississippi

A federal court is currently deciding whether some felons within the state will receive their right to vote back. According to the Associated Press, the state currently bans people convicted of 22 crimes including murder, forgery, bigamy, timber larceny and carjacking from voting after they are released. To have the rights restored, each felon must get a pardon from the governor or ask the state legislature to pass a bill that restores their right to vote.

If an individual has not committed one of the 22 offenses listed by the state of Mississippi, they will automatically have their voting rights restored.

Nebraska

There is a two-year waiting period in Nebraska before a felon who has completed his/her sentence is allowed to vote. (Source: Nebraska State Legislature)

Tennessee

According to Tennessee’s Secretary of State’s website, a felon can receive his/her voting rights back if his/her record is expunged by the governor or if the state agrees to restore his/her voting rights. A felon must apply to have his/her voting rights restored.

Felons who have committed what’s called an “infamous crime” may never receive their right to vote back. The Secretary of State of Tennessee’s website has a list of those crimes.

Virginia

The state of Virginia will not allow felons to vote unless the Governor or another appropriate authority reinstate the right to vote to that specific individual. In 2016, then-Governor Terry McAuliffe tried to implement an executive order that would automatically restore the voting rights of felons who had completed their prison sentence and terms of parole or probation, but that was blocked by the Virginia Supreme Court.

As a result, WAMU reports that McAuliffe personally signed off on the voting rights of 173,000 felons during his tenure. His successor, Governor Ralph Northam has signed off on more than 22,000 more since taking office.

Wyoming

According to the Wyoming Department of Corrections, anyone who is a first-time, nonviolent felon can automatically have their voting rights restored if they completed their supervision or they were discharged after January 1, 2010. Anyone who completed their sentence before January 1, 2010, must apply for the restoration of the right to vote.

WOTC at Work in Empowerment Zones and Renewal Communities

If you plan to hire new employees in the coming months, the Work Opportunity Tax Credit (WOTC) may be one of the best ways to offset the increased cost of doing business in the short-term. That’s because when you hire employees from key groups such as ex-felons, veterans, and persons with disabilities, the IRS will give you a break for the employee’s first year of employment. It’s a good deal.

The WOTC is something that we here at Tax Credit Group, Inc. specialize in and we understand the ins and outs of the process of applying for and receiving the credit. A little while ago, we wrote a blog post telling you some of the most important keys of the WOTC. It covers the basics.

But like most things the IRS is involved in, there’s a lot more to the WOTC than meets the eye. While veterans, persons with disabilities, and ex-felons are key hires, the WOTC also gives you credit for hiring people who live in an Empowerment Zone, an Enterprise Community or a Renewal Community.

I know you’re thinking, that sounds great, but what are they?

What is an Empowerment Zone, Enterprise Community or a Renewal Community?

According to the U.S. Department of Housing and Urban Development (HUD), “Renewal Communities (RCs) and Empowerment Zones (EZs) are distressed urban and rural communities where qualifying businesses are eligible for billions of dollars in tax incentives.”

These community designations were created in 1993 with the idea of reducing unemployment and generating economic growth in distressed communities. Communities that applied to participate in the program were asked to provide comprehensive plans that included strategic visions for change, community-based partnerships, sustainable community development, and economic opportunities.

The U.S. government used census data to help designate these communities, but it was up to leaders in the communities themselves to apply for these tax incentives.

While there are fewer of these zones and communities today, they still exist. In most federal publications, you will hear the terms Empowerment Zone or Renewal Community and you will rarely hear the term Enterprise Community.

Extension of the WOTC

In December 2019, Congress extended the WOTC to December 31, 2020. As part of that extension, the government extended the tax credit regarding Empowerment Zones, Enterprise Communities, and Renewal Communities retroactively so that it applies to the period from January 1, 2018 to December 31, 2020.

In other words, the tax credit you receive for hiring people from these zones and communities still exists.

How do I find out if someone I employee lives in an Empowerment Zone or Renewal Community?

The IRS publication 8850 outlines all of the Empowerment Zones and Renewal Communities (called Renewal Counties by the IRS), but we’ll look at some of the key ones.

Note that in each of the lists below, Empowerment Zone does not apply to the entire city or county but rather specific zip codes within that city or county.

Urban Empowerment Zones

  • Baltimore, Maryland
  • Boston, Massachusetts
  • Chicago, Illinois
  • Cincinnati, Ohio
  • Cleveland, Ohio
  • Columbia/Sumter, South Carolina
  • Columbus, Ohio
  • Cumberland County, New Jersey
  • Detroit, Michigan
  • El Paso, Texas
  • Fresno, California
  • Gary/Hammond/East Chicago, Indiana
  • Huntington, West Virginia
  • Ironton, Ohio
  • Jacksonville, Florida
  • Knoxville, Tennessee
  • Los Angeles, California
  • Miami/Dade County, Florida
  • Minneapolis, Minnesota
  • New Haven, Connecticut
  • New York City, New York
  • Norfolk/Portsmouth, Virginia
  • Oklahoma City, Oklahoma
  • Philadelphia, Pennsylvania
  • Camden, New Jersey
  • Pulaski County, Arizona
  • San Antonio, Texas
  • Santa Ana, CA
  • Louis, Missouri
  • East St. Louis, Illinois
  • Syracuse, New York
  • Tucson, Arizona
  • Yonkers, New York

Rural Empowerment Zones

  • Aroostook County, Maine;
  • Desert Communities in Riverside County, California;
  • Parts of Griggs County and all of Steele County in North Dakota;
  • Kentucky Highlands including parts of Wayne County and all of Clinton and Jackson Counties;
  • Mid-Delta Mississippi including parts of Bolivar, Holmes, Humphreys, Leflore, Sunflower, and Washington Counties;
  • Middle Rio Grande FUTURO Communities in Texas including parts of Dimmit, Maverick, Uvalde, and Zavala Counties;
  • Oglala Sioux Tribe, South Dakota including parts of Jackson and Bennett Counties and all of Shannon County;
  • Rio Grande Valley in Texas including part of Cameron, Hidalgo, Starr, and Willacy Counties.

The HUD website used to have a locator, but at last check, it was not working. At this time, it’s better if you contact us here at Tax Credit Group or your local government agency to find out what zip codes fall in an Empowerment Zone or Renewal Community.

Conclusion

Navigating the federal tax code is extremely difficult. It is a massive document and even the most seasoned of CPAs don’t have a grasp on the entire thing. We here at Tax Credit Group make it our business to understand the tax credit side of the tax code and we keep up to date on the latest developments involving tax credits like the WOTC.

The information that we’ve provided above is meant to be informative, but not a specific recommendation directed at your business. It’s tough to know if a tax credit applies specifically to your business without seeing the whole picture first.

If you would like to explore WOTC opportunities further, please contact us.

Tax Deductions Your Small Business Might Be Missing

Tax time is coming. There are few certainties year over year, but your tax deadline is one of them. For small business owners, this can be a scary time of year. Have you gathered all the paperwork you need to give your accountant? Have you paid enough in estimates? And the big question, are you going to owe money?

2020 Tax Deadlines

Let’s start with the basics. When are your taxes due? Depending on the type of taxes you file, you have different deadlines. The IRS has a whole booklet on deadlines, but here are the biggest ones.

Filing Type Deadline Extension Deadline
Partnership March 16, 2020 September 15, 2020
S Corporation March 16, 2020 September 15, 2020
C Corporation April 15, 2020 October 15, 2020
Sole Proprietorship April 15, 2020 October 15, 2020
Personal Taxes April 15, 2020 October 15, 2020

While extensions are nice, seasoned small business owners know that even if you file a tax extension, the money is still due and a large portion of that tax return has to be completed by the March/April deadline.

In other words, the extension only helps a little.

How it can help, however, is it can give you more time to decide and find those deductions that might help you lower what you owe the federal government. As you’re looking for new deductions that you might have missed, consider some of the following items.

Bad Debt

We’re not talking about the money you may owe someone and have not paid, but the money that a customer owes you and has not paid. To claim a deduction, you must prove to the IRS that you’ve taken multiple actions to try and collect the debt. If you used a professional to help, such as an attorney or collection agency, then that fee is also deductible.

The IRS does not want to punish you simply because someone else refuses to pay.

Interest and Fees

A small amount of debt for a business can be a good thing. Maybe, you’re paying down the purchase of a large piece of equipment or you’ve made improvements and are paying for them in installments. Whatever the case, the IRS will allow you to deduct interest on loans and credit cards as well as late fees. You’re also able to deduct bank fees for overdrafts and insufficient funds.

Home Office

This one is tricky, but completely worth it if you know how to calculate the deductions. You first need to prove that the area you call your home office is where you do a majority of work. Then measure that area.

For instance, if your “office space” is a desk on the side of your living room, then measure the square footage your “office space” takes up. Take into account the footprint of the desk, your office chair and the space around your chair that you use for filing, movement, and supplies. A common misconception is that a home office must be a room with doors and walls. That’s not true. A home office can be a portion of a room.

Once you know the square footage of your home office, you can use that number to calculate the percentage of utilities, mortgage interest, insurance, etc. that your office space uses within the home.

Education and Training

Many professionals need to take courses to maintain their credentials or licenses. Most of those courses cost money. But that money is tax-deductible. Search the past year for any membership dues that you pay to professional organizations, fees for workshops, conferences and tradeshows. They are all tax-deductible.

Conclusion

Remember, the advice in this post is only meant as a guideline and may or may not be pertinent to your specific situation as an individual or small business owner. Only a CPA can tell you whether these deductions are something that you can apply to your business. Be sure to consult a professional before you make any deductions that you are unsure about.

And as you’re preparing for your meeting with your CPA, get a jump on some of the things he or she might ask you for. If you’re looking for a place to start, take a look at our previous post 10 Things Small Business Owners Can Do to Get A Head Start on Taxes.

24 States Increase Minimum Wage in 2020

The start of 2020 also means a new round of minimum wage increases across the country. While the federal minimum wage is $7.25 per hour and it hasn’t changed in more than a decade, states continue to adjust their minimum wage to help America’s lowest earners keep up with the cost of living.

On January 1, 2020, 21 states increased the minimum wage and 3 others will add a minimum wage increase by the end of the year (Source: National Employment Law Program).

Minimum Wage Increases by State

*Minnesota considers a large employer to be a company that does $500,000 or more in annual revenue or has more than 100 employees.

**Minnesota considers a small employer to be a company that does less than $500,000 in annual revenue and has fewer than 100 employees.

***New York’s minimum wage change took place on December 31, 2019. The next change will take place on December 31, 2020, when the minimum wage will rise to $12.50 per hour.

 

In addition to these changes at the start of 2020—or in the case of New York on the final day of 2019—there are a small number of states that will increase the minimum wage partway through 2020.

On July 1, 2020, Oregon will increase its minimum wage from $11.25 per hour to $12 per hour.

Also on July 1, 2020, Nevada will require companies that offer health benefits to increase their minimum wage to $8 per hour, up from $7.25 per hour. Minimum wage workers who are not offered employer health benefits will see their wages rise from $8.25 per hour to $9 per hour on July 1, 2020.

Connecticut is expected to increase its minimum wage from $11 per hour to $12 per hour on September 1, 2020.

While a majority of states are pushing toward a $15 per hour minimum wage, five states in the U.S. still operate with the federally mandated minimum wage. They are Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.

Illinois Implementing Two Minimum Wage Increases in 2020

The state of Illinois isn’t just hiking the minimum wage at the start of 2020, it’s also doing it in the middle of 2020. On July 1, 2020, the state’s minimum wage will jump again, this time to $10 per hour. This is all part of the state’s plan to reach the $15 per hour mark by 2025.

How Illinois is Helping Small Businesses with the Minimum Wage Increase Through Tax Credits

Luckily for small businesses, state legislators recognize that two minimum wage increases over six months can be a major burden for small businesses. That’s why the state has set aside money for tax credits. Small businesses with 50 employees or fewer will have to adhere to the state’s minimum wage increases but can apply for credits through form IL-941.

The maximum tax credit allowed will be 25 percent of the difference between the new minimum wage and what the employee was previously paid.

Preparing for Minimum Wage Increases in Your States

State lawmakers try to give small businesses as much warning as possible when it comes to minimum wage increases. In many states, the increases are not just a one-time deal but something that occurs annually. You must be aware of what your state lawmakers are doing and when those changes are set to take effect so that you can properly prepare yourself, your business, and your employees.

Run the Numbers

Before a minimum wage increase takes place, run through the numbers. Calculate what kind of increase that means weekly, bi-weekly, monthly, and annually for your expenses.

You want to remember that an increase of $1 more per hour in wages is much more than that when it comes to the cost of doing business. It also means an increase in Social Security, unemployment, disability insurance, and workers’ compensation. When you’re calculating what you can afford, make sure that you take this into account as well.

Make Your Business More Efficient

More often than not, an increase in the minimum wage also means you’ll need to increase the efficiency of your business. Look at your business model and see if there are ways that you can be more efficient. See if there is fat you can trim.

How the SECURE Act May Change Your Mind About Offering an Employee Retirement Plan

In late December 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The act is designed to increase access to tax-advantaged accounts for more Americans and keep older Americans from outliving their retirement assets.

One of the biggest steps the SECURE Act takes is to incentivize small businesses to offer a retirement plan for employees.

Small Business Benefits in the SECURE Act

The act has several provisions that will add incentives for small businesses to create retirement plans for their employees.

The site Society for Human Resource Management (SHRM) outlines all of the benefits here, but here are a few of the highlights you need to know about.

  • The SECURE Act increases the tax credit incentive for starting up a retirement plan. The credit increases from the current $500 to up to $5,000 in some circumstances;
  • There’s another tax credit for small businesses that create an automatic enrollment plan for new employees. It’s an additional $500 credit for three years;
  • The act will also give companies more time to adopt new plans and simplify some of the rules and requirements for safe harbor 401(k) plans.

In-Plan Annuities for Retirement Plans

The other change the SECURE Act offers is an expansion of the ability for employers to offer a group annuity to employees.

According to Investopedia, “An annuity is a financial product that pays out a fixed stream of payments to an individual. These financial products are primarily used as an income stream for retirees. Annuities are created and sold by financial institutions, which accept and invest funds from individuals. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.”

Until now, employers have been wary of annuities because if their provider is out of business when the payouts begin, the employer can be held responsible. The SECURE Act makes it so employers can be protected from liability if the annuity provider has met a series of requirements for the past seven years.

Those requirements include:

  • The annuity provider has a license provided by the state insurance commissioner;
  • The annuity provider has filed audited financial statements as required by state laws;
  • The annuity provider meets the statutory requirements in all the states that the annuity provider does business.

Other Retirement Changes in 2020

In a separate move, the IRS increased the 401(k) contribution limit.

The contribution limit has increased for employees who take part in a 401(k), 403(b), most 457 plans, and the Thrift Savings Plan. The contribution limit has increased from $19,000 to $19,500. The catch-up contribution limit for employees 50 and over has increased from $6,000 to $6,500.

You can find the details on the IRS site here.

Conclusion

These new incentives to start and maintain an employee retirement plan may be just the push your business needs to get the ball rolling. If you’re considering adding an employee retirement plan, check out this previous post that looks at your retirement plan options.

You also want to consider if this is the right move for your business. Consult your accountant before you make any moves and if you need any advice on what tax credits do and do not apply to your specific situation, feel free to contact us here at the Tax Credit Group.

Cuts to SNAP Benefits Strike in 2020

You may have heard that there will be significant changes to the Supplemental Nutrition Assistance Program (SNAP) in 2020, but sometimes the details of those changes are hard to figure out.

The good news, if there can be any, is that these changes don’t go into effect until April 1, 2020, so if you’re one of the nearly 700,000 people affected by the changes then you have a little more time to plan for them.

What is SNAP?

The Supplemental Nutrition Assistance Program (SNAP) is designed to help low-income families put food on the table. It was previously known as food stamps.

According to the site Feeding America, more than 9.5 million families with children are on SNAP. Additionally, “…in 2015, SNAP lifted 4.6 million Americans above the poverty line, including 2 million children and 366,000 seniors.”

What are the changes to SNAP in 2020?

There’s one key change that will have a sweeping effect on nearly 700,000 people. Under the current system, benefits are provided for three months to able-bodied adults without dependents. Those benefits can be extended at the state’s discretion if the person is not working a minimum of 20 hours per week or participating in a training program. This extension usually happens where there is high unemployment.

Under the new rules, states will only be able to issue a waiver if the unemployment rate is over 6 percent in the area where the applicant lives. Waiver applications will require specific details and data for approval. In other words, it’s going to be even harder to get those benefits extended past the three-month cap.

Who will be affected by the changes to SNAP in 2020?

This change is designed to impact people who are able to work and have no dependents. The changes are not expected to impact people over the age of 50, disabled, pregnant or people with dependents.

Many of the people who will lose benefits are considered low-wage workers and people who work in the retail or food service industry where hours vary from week to week and are never guaranteed.

SNAP utilities changes will help some, hurt others

There are two other changes to the SNAP program that are being considered.

The first is expected to hurt many households while helping a small number of others. According to the site New Food Economy, “The change is expected to take food stamps from up to 8,000 households and reduce payments for one in five families, though it is also projected to increase payments for 16 percent of families.”

Currently, SNAP recipients receive a little more help if a large portion of their paychecks goes to pay for things like rent and utilities. For some states, it’s hard to keep track of a specific number for each household, so the state creates a flat number for all households. Under the new proposal, a nationwide standard will be used.

Some households will see an increase in benefits because of this change, but others will see a decrease in benefits, and some could lose their benefits altogether.

This is a change that has not gone into effect yet but could go into effect in 2020. The public comment period on this suggested change closed in early December 2019. There’s no word on when the change will go into effect.

SNAP changes affecting green cards delayed

The Trump Administration also tried to enact new rules that would require immigration officials to look at whether an applicant uses SNAP when processing green cards. The rules were set to go into effect in October 2019, but multiple states have filed lawsuits against the changes. At this time, the issue is tied up in court and will not go into effect until the court rules.

You can find the latest details on the issue here.

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