Maryland & IRS tax credits for businesses
Maryland’s Job Creation & Recovery Tax Credit announces tax credits
Maryland recently passed a tax credit available to employers conducting or operating a trade business in Maryland that could net up to $5,000 for each qualified new hire employee. Sounds easy, right? You guessed it-no it’s not that easy so let’s take a look at a few of the qualifications and stipulations in this bill. Businesses operating or conducting business in Maryland that hire certain workers for newly-created or certain vacant positions in the State may be entitled to the credit. Employees must be Maryland residents hired into full-time, newly created positions or a full time position that had been vacant for at least six months. Sole proprietorships, corporations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit. Here is the tricky part; potential new hires for the credit must be receiving unemployment benefits or have exhausted their benefits in the previous twelve months and not working full time. So how do you know the potential new hire is eligible for the tax credit? DLLR recommends asking the individual for a Citibank debit card with a Maryland blue crab on it that is issued by the DLLR Division of Unemployment (this is issued while on unemployment) or the interview can fax a written request to the DLLR for verification and this in turn may be faxed back to the potential employer. Employers must receive certification from the DLLR prior to participating in the program and applications are on a first-come, first-serve basis. An employer may receive a maximum credit of $5,000 and the credit is claimed on the employer’s tax return. Once you have been certified by the state and the employees suits the criteria you will be required to file for tax year 2009 only, you must attach new Form 500JR to your income tax return (Form 500). For 2010 and 2011, the Comptroller’s Office will be updating Form 500CR to include this credit. For personal returns a modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to Form 500JR that is submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns. The tax credit is a great incentive but most certainly adds a degree of administrative labor. Contact your accountant for more information or visit dllr.state.md.us/taxcredit/jcrtcflyer.pdf or call 410.767.2996 to see how you can qualify.
IRS Tax credit for new hires
The IRS recently released the qualifications for the Payroll Tax Exemption for Hiring Unemployed Workers. This one reads a little easier than the State of Maryland’s Tax Credit Recovery. The IRS says a 6.2 percent share of social security tax on all wages paid to qualified employees from March 19, 2010 through December 31, 2010 and is deducted from the 941 quarterly filing. Employers which qualify are taxable businesses and tax-exempt organizations while household employers are not eligible; Interviewees who will qualify are those who begin employment with a qualified employer after February 3, 2010 and before January 11, 2011. The interviewee must have been unemployed or employed for less than forty hours during the sixty day period ending on the date employment begins. The potential 941 tax credit individual must certify by signing an affidavit form issued by the IRS that they have not been employed for more than forty hours during the sixty day period. The credit does apply if the new hire fills an exisiting job if the worker terminated their employment or was terminated for cause. Form 941was revised to accommodate the tax credit. Visit irs.gov for forms and all the information needed to get your tax credit.
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