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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.

© Copyright 2020 Tax Credit Group, Inc.

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