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Put new tax credit to work for your business

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in Small Business Tax

To encourage employers to hire workers from certain disadvantaged groups, Uncle Sam has provided two tax credits: the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WTW) credit. Both credits officially expired after 2005.

Alert: The new Tax Relief and Health Care Act of 2006 reinstates the credits retroactive to Jan. 1, 2006. Plus, the new law enhances the available tax breaks and combines the two credits under a single umbrella for 2007.

If a worker comes from a qualified group, he or she must receive certification by the proper state authorities (more on this later).

How the WOTC works

The WOTC is equal to 40 percent of the first-year wages up to a maximum of $6,000 in wages. Thus, the maximum first-year credit for a worker is $2,400.

To qualify for the full 40 percent credit, the law generally requires the employee to have worked at least 400 hours. An employer may obtain a reduced 25 percent...(register to read more)

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