How to save up to $9,000 per employee in payroll taxes by hiring targeted employees

Qualify for federal payroll tax credits

You may be able to save money on your federal taxes through the Work Opportunity Tax Credit (WOTC) program (formerly known as the Targeted Jobs Tax Credit (TJTC) in Washington State by hiring someone from one of the following groups who has traditionally faced significant barriers to employment.

NOTE: The American Recovery and Reinvestment Act of 2009 expanded the WOTC program to include two new target groups: unemployed veterans and disconnected youth hired 2009 and 2010.

Unemployed veterans qualify if they:

• Were discharged from active duty during the past five years, and
• Received unemployment benefits for at least four weeks in the last year.

Disconnected youth whose age is 16 to 24 qualify if during the last 6 months they

• Have not regularly attended any school, and
• Earned less than minimum wage in a 30 hour work week, and
• Do not have a high school diploma or GED or have received it at least 6 months ago and have not held a job or been admitted to a technical school or college since receiving the certificate.

Two years of tax savings for long-term welfare recipients

You can save up to $9,000 over two years if you hire someone who is a member of a family that:

• Received Temporary Assistance to Needy Families (TANF) cash benefits for at least the previous 18 consecutive months.*

OR

• Received 18 months of TANF since August 1997 and the 18th month is within the last two years.*

OR

• Stopped being eligible for TANF payments within the last two years because he or she exceeded the maximum time allowed for benefits.
  

How much you can save

First year

1-119 hours worked = No credit
120-399 hours worked = 25 percent of the first $10,000 in wages (up to $2,500)
400+ hours worked = 40 percent of the first $10,000 in wages (up to $4,000)

Second year

50 percent of the first $10,000 in wages (up to $5,000)

Other tax savings

You also can qualify for tax credits if you hire someone from one of the following groups:

A short-term welfare recipient who is a member of a family that has received Temporary Assistance to Needy Families (TANF) cash benefits for at least nine of the last 18 months.*

A veteran who is:

• A member of a family that has received food stamps for at least three consecutive months in the last 15 months.*

OR

• Receiving disability-benefit payments for a service-connected disability and is hired within one year of being discharged from active service.

OR

• Receiving disability-benefit payments for a service-connected disability and has been unemployed for at least six of the previous 12-months.

An ex-felon who:

• Was released within the last year OR is participating in a work-release program.

An 18 to 39-year-old who:

• Lives in a federally designated Enterprise Community or Renewal Community (Tacoma, Yakima, Okanogan and Ferry counties).

OR

• Is a member of a family that has received food stamps for the last six months prior to the hire date.*

A person with a disability who:

• Is participating in a vocational-rehabilitation program through the Division of Vocational Rehabilitation, Services for the Blind, the U.S. Veteran’s Administration or the Social Security Ticket-To-Work program.

OR

• Received Supplemental Security Income (SSI) for any month in the previous 60 days.
  

A 16- or 17-year-old (summer youth) who lives in a federally designated Enterprise Community or Renewal Community (Tacoma, Yakima, Okanogan and Ferry counties) and is hired between May 1 and September 15.

* The person you hire must have personally received TANF or food stamps for one of the required months.

How much you can save

Tier 1 – Employee worked 120-399 hours within the first year

For each employee = 25 percent of first $6,000 in wages (up to $1,500).
For disabled veterans = 25 percent up first $12,000 in wages (up to $3,000).
For summer youth = 25 percent of first $3,000 in wages (up to $750).

Tier 2 – Employee worked 400+ hours within the first year

For each employee = 40 percent of first $6,000 in wages (up to $2,400).
For disabled veterans = 40 percent up first $12,000 in wages (up to $4,800).
For summer youth = 40 percent of first $3,000 in wages (up to $1,200).

Apply right away

Forms must be post-marked within 28 days of the date the new employee started the job. Employment Security must have original signatures, so they cannot accept photocopies or faxes.

Follow these steps to apply.

1. Have the applicant complete and sign the pre-screening form (IRS 8850).
   If the applicant has checked one of the boxes and you think he or she qualifies, complete and sign Page 2 of the form.
   
2. Complete the Individual Characteristic form (ETA 9061).
   
3. Mail all completed forms to:
   Employment Security Department
   WOTC Administrative Unit
   P.O. Box 9046
   Olympia, WA 98507-9046

All late and incomplete applications will be denied.

For more information, contact ESD

Do I have to declare my barter income to the Washington State Department of Revenue?

The answer is yes if you are doing business in Washington State.

Recently, I was asked by a client that I met through Biznik - a new national business and startup networking group if I would be interested in trading my QuickBooks training and tutoring services for their marketing expertise. So I asked the agency that handles these sort of matters the following question:

If I trade, swap, or barter my services for third party services, is the value of the services that I receive reportable and do I have to pay B&O tax on the value of the service that I receive? What if I barter my services for goods?

According to the Department, "generally, barter transactions are considered income for tax reporting purposes and subject to B&O tax and retail sales or use tax, if appropriate.

The measure of tax is based on the amount of consideration actually received or accrued which includes the value of the property or services a business receives in lieu of any monetary payment for such services or property.

The value of the property received is defined in the Washington Administrative Code (WAC) 458-20-112.

In addition, any purchase of goods by a business (via barter) without payment of retail sales tax is subject to use tax on the value of the goods."

If you want to find out how to set up a barter account in your QuickBooks company file, contact me.