If you hire 16- or 17-year-olds this summer, don't overlook a tax credit worth up to $1,200 per eligible employee. The Work Opportunity Tax Credit (WOTC) allows you to secure the credit if those new employees live in an "empowerment zone, enterprise community or renewal community," as designated by the federal government. The credit is equal to 40 percent of the eligible employee's first $3,000 in wages. (See tip No. 6 on page 2.)
Don't think the WOTC is just for inner-city youth. Credit-eligible locations are spread out across the country, including rural areas. To find out if your business is located in one of those areas, go to http://hud.esri.com/locateservices/ezec or call (800) 998-9999.
Advice: You must obtain WOTC certification for that employee before he or she starts work. To do so, file a pre-screening form, Form 8850, available at www.irs.gov/pub/irs-pdf/f8850.pdf. Don't send that form to the IRS. Send it to your state agency that's responsible for processing requests. Find your state agency at www.uses.doleta.gov/pdf/sesacoorddirect00.pdf.
You also must complete the U.S. Labor Department's Form 9061, Individual Characteristics Form, or Form 9062, Conditional Certification Form.
Qualified summer youth employees are defined as those who:
• Perform services between May 1 and Sept. 15.
• Are 16- or 17-years-old on the hiring date and haven't been employed at your business before.
• Live in an empowerment zone, enterprise community or renewal community.
For more information on the WOTC, go to www.uses.doleta.gov/wotcdata.asp.