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Tax breaks that can help businesses with hiring

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In my neighborhood, the windows of businesses large and small are plastered with "Help Wanted" signs. My suburban Austin area is not alone.

In the best of times, businesses face challenges in finding the best workers for their needs. This is not the best of times when it comes to hiring. Right now, according to the U.S. Chamber of Commerce, there are 9.9 million job openings in the United States, but only 5.8 million unemployed workers.

This tight job market is why it's critical that companies don't undercut their hiring efforts. Some do just that by imposing hurdles that could discourage great future employees from applying.

This often happens when it comes to workers with disabilities. Potential employees might not apply because they literally see that getting to the job would be a burden.

The tax code can help.

Here's a look at some provisions in the Internal Revenue Code that businesses can use to help offset the cost of making businesses accessible to people with disabilities.

Disabled Access Credit: The Disabled Access Credit is a non-refundable credit for small businesses that have expenses for providing access to people with disabilities.

As a credit, this tax break will offset your business tax liability dollar-for-dollar, but since it's nonrefundable, you can't get any excess credit as a refund. Still, zeroing out your bill is pretty darn good.

To qualify for the Disabled Access Credit, your business must have earned $1 million or less or had no more than 30 full-time employees in the previous year.

If your company meets either of these thresholds, you can claim the 50 percent credit for eligible access expenditures. These include, for example, removing physical barriers that make your business inaccessible or unusable by individuals with disabilities and acquiring or modifying equipment or devices for individuals with disabilities.

You can claim the credit for each year you have qualifying access expenditures.

File Form 8826, Disabled Access Credit. That's the full form shown below. The form's instructions on page 2 have more on qualifying expenditures.

Form 8826 disabled access credit1
See more tax forms and more about them at Tax Forms 2023.


Barrier removal tax deduction: The architectural barrier removal tax deduction encourages businesses of any size to remove architectural and transportation barriers that helps people with disabilities and the elderly get around more easily.

Businesses may claim a deduction of up to $15,000 a year for qualified expenses on items that normally must be capitalized.

You must own or lease the facility or vehicle for use in connection with your business. A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property.

The barrier removal also must meet the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990.

Some architectural barrier removal costs that can be deducted are —

  • Ground and floor surfaces,
  • Walks,
  • Parking lots,
  • Ramps,
  • Entrances, including doors and doorways.
  • Stairs.
  • Floors,
  • Bathroom facilities,
  • Water fountains,
  • Elevators, and
  • Signage and symbols of accessibility.

Businesses claim this deduction by listing it as a separate expense on their timely-filed income tax return. You can read more about the barrier removal costs deduction in Internal Revenue Service Publication 353, Business Expenses (page 28).

Here's some even better news. The IRS says that businesses may use the Disabled Access Credit and the architectural tax deduction together in the same tax year if the expenses meet the requirements of both benefits.

Work Opportunity Tax Credit: The Work Opportunity Tax Credit is available to employers for hiring individuals who have consistently faced significant barriers to employment. Qualifying workers come from a variety of sectors, including veterans and people with disabilities.

The maximum amount of tax credit for employees who worked 400 or more hours of service is:

  • $2,400 or 40 percent of up to $6,000 of first year wages for qualifying individuals.
  • $9,600 or 40 percent of up to $24,000 of first year wages for certain qualified veterans.

A 25 percent rate applies to wages for individuals who work at least 120 hours but less than 400 hours for the employer.

To claim the credit, you the employer must first get certification that an individual is eligible. Do this by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit (excerpt below), to your state workforce agency within 28 days after the eligible worker begins work.

Form 8850 WOTC prescreening1
See more tax forms and more about them at Tax Forms 2023.


Note that while this is an IRS form, do not submit Form 8850 to the IRS. Send it to your state workforce agency, which also should be able to answer any question you have about the form.

You also might find these items of interest:

 

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