Frequently Asked Questions
1. What is a tax credit?
A tax credit is a reduction in the amount of taxes that you owe. Credits are not a tax deduction but rather a dollar-for-dollar reduction in your actual tax liability, which makes them much more valuable than a deduction.
2. What if I am operating at a loss?
Most tax credits have a carry forward period so you may accumulate the credits in order to use them when you are profitable. For example, the Work Opportunity Tax Credit is applied back one year and forward for 20 years.
3. Will you work with my CPA?
Absolutely. We often are referred to companies by their CPA's. Our job is not to replace your CPA but rather compliment their work. Many of these programs are more closely aligned with human resources rather than actual accounting work and wouldn't be within the scope of services that your CPA would provide.
4. Which credits will you screen my company for?
Every client will automatically be screened for the geographically based incentives such as the Renewal Community, Empowerment Zone, Enterprise Zone and Rural Renewal Counties. Additionally, we offer a customized, case-by-case approach to your incentives to make sure your company is taking advantage of the appropriate credits in your state and industry.
1. What is WOTC?
WOTC, or the Work Opportunity Tax Credit, is a federal point-of-hire tax incentive that was created to reward businesses for hiring employees from certain targeted groups who have historically had high unemployment rates. The credit is calculated based on the number of hours your employees work as well as their wages.
2. What is a "WOTC Piggy-Back" Credit?
A "piggy-back" credit is an unofficial term used to describe a tax credit that can be qualified for by an employee or applicant that also is qualified for WOTC. If your company is in a location that has these types of "piggy-back" credits available, we will be sure that you are capturing them. These are usually State credits, like the California Enterprise Zone Credits.
2. What is Welfare-to-Work?
The Welfare-to-Work credit is another federal incentive that gave business owners a credit for employing applicants who were recipients of governmental assistance. The Welfare-to-Work program was combined with the Work Opportunity Tax Credit in 2007.
3. Can I screen my existing employees for WOTC?
Unfortunately, no. WOTC is a point-of-hire credit so we may only screen new applicants. However, there are many location based credits that will apply to existing employees.
4. Since I can't screen my existing employees, can I fire and re-hire everyone so that we can screen them?
Again, unfortunately, no. WOTC will only give credit for new applicants that have never worked for the employer before.
5. What info will I need to give to you, and how often?
We must receive the screening paperwork that each of your applicants complete within just a few business days of its completion. We will contact you if we need any supplemental documentation from your employees. We will also need a payroll feed in order to calculate your credits since they are based on employee hours and wages.
6. What are my responsibilities?
Since you are outsourcing this operational service, our goal is for you to be able to get this project off your plate. We simply ask that you provide us with the most accurate and up-to-date information available to you and a contact person that we can reach when we have questions. We'll take care of the rest.
7. What is MyTCS? Can I have a demonstration?
MyTCS is our proprietary tax credit screening and management software that we use in house to pre-screen and track each of your records. By allowing you a personal window into our software, you can view each of your WOTC submissions, check their progress in the certification time line, get real-time credit estimates based on their answers on the screening questionnaires and have actual vendor accountability. At any time, you can request a virtual demonstration of MyTCS and see how the software flows and will improve your HR Department.
Geographically Based Credits
1. Do these location based credits apply to my current employees or just the new hires?
The Empowerment Zone, Renewal Community and Indian Employment Credits all apply to existing employees and not just to new hires. Most other location based credit also apply to existing employees.
2. What is a Renewal Community and how do I know if I am in one?
Renewal Communities are areas designated areas that have higher poverty levels, unemployment and crime rates and low income households than the areas surrounding them. Renewal Communities offer tax credits for businesses that employ persons who live and work in the zone. We will automatically screen you and your applicants to see if you are in a Renewal Community.
3. What is an Empowerment Zone and how do I know if I am in one?
Empowerment Zones, like Renewal Communities, are areas that are designated based on their levels of poverty, unemployment, crime and low-income households. To be eligible for the Empowerment Zone credit, you must live and work in the zone. This is another credit that Tax Credit Services will automatically screen your company and all it's employees for.
4. What is the Indian Employment Credit?
If you employ a Native American Indian or the spouse of a Native American Indian that lives and works on a federally recognized reservation, you can receive a tax credit, up to $4,000 per qualified employee.