Many businesses are leaving valuable payroll tax credits unclaimed, missing out on significant financial benefits. Programs like the Work Opportunity Tax Credit (WOTC), Federal Empowerment Zone (FEZ) Credits and Research and Development (R&D) credit offer substantial savings, yet they often go overlooked due to lack of awareness or resources. Here’s a closer look at these credits and how your business can capitalize on them:
Work Opportunity Tax Credit (WOTC)
Since its introduction in 1996, the WOTC incentivizes hiring from specific groups, such as veterans, long-term unemployed and individuals receiving government assistance. The Department of Labor estimates that one in five employees qualify their employer for this credit, which can reach up to $9,600 per hire, depending on the employee’s category and hours worked. In 2023; over $1 billion in WOTC credits were claimed annually, yet many eligible businesses failed to apply, mainly due to unawareness. This credit is a powerful tool for reducing tax liability while supporting diverse hiring.
Federal Empowerment Zone (FEZ) Credits
The FEZ program rewards businesses for employing residents of designated empowerment zones—economically distressed areas targeted for revitalization. Employers can claim up to $3,000 per qualifying employee, based solely on their residence. Established under the Community Renewal Tax Relief Act of 2000, these credits aim to stimulate local economies. Despite their simplicity, many businesses overlook this opportunity, leaving significant savings unclaimed due to unfamiliarity with eligible zones and/or the application process.
Research and Development (R&D) Credit
The R&D tax credit is often mistaken as a program exclusive to high-tech industries, but it applies broadly and can include businesses improving their processes. This dollar-for-dollar reduction in tax liability can cover wages for employees engaged in qualifying activities, such as streamlining operations or developing new techniques. For example, a manufacturing firm enhancing production efficiency may qualify. Recent expansions to the credit, including the 2015 PATH Act, made it permanent and accessible to smaller businesses, yet many still miss out due to its perceived complexity.
Why Businesses Miss Out
Two primary barriers prevent companies from claiming these credits: lack of awareness and insufficient resources to navigate eligibility, calculations and filings. Identifying qualifying employees, documenting activities and submitting accurate claims can be time-consuming and complex, especially for businesses without dedicated tax expertise.
How PayMaster Can Help
As your trusted payroll service provider, PayMaster simplifies the process. We partner with tax credit experts to identify opportunities tied to your workforce, hiring practices and business locations. Our streamlined approach ensures no disruption to your operations and eliminates the need for complicated software. Once credits are identified, we provide comprehensive documentation for your CPA or tax professional to file, maximizing your tax credit received with minimal effort.
Seize the Opportunity
These tax credits were designed to reward businesses for growth, innovation and community investment. By understanding and claiming them, you can significantly reduce your tax burden. With PayMaster’s expertise, unlocking these savings is easier than ever. Don’t leave money on the table. Let us help you claim what’s yours.
While we make every attempt to ensure the accuracy and reliability of the information provided in this document, the information is provided “as-is” without warranty of any kind. Romeo Chicco or PayMaster, Inc. does not accept any responsibility or liability for the accuracy, content, completeness, legality or reliability of the information contained. Consult with your CPA, Attorney, and/or HR Professional as federal, state, and local laws change frequently.
