Tax Incentives Blog

California State Employment Incentives: Increasing Your Return

Posted by Rose Davidson on Jul 27, 2017 4:04:20 PM

business-2518262_640.jpgDoes your organization apply for employment incentives? Are you wondering if your organization qualifies for any employment incentive programs? Companies that frequently hire new employees over the course of a tax year may be missing out on significant tax savings if they do not submit for employment tax credits. California offers businesses a number of opportunities to earn credits through the California Enterprise Zone Program, the California Competes Tax Credit and the California New Employment Tax Credit.

Consider implementing new tax savings strategies that benefit your budget and learn how to capture California state employment tax credits.

What is Available?

Working with an outsourced tax consultant alleviates the frustrations associated with applying for tax credits. In addition, outsourced tax consultants will also guide and educate your organization regarding what tax incentives are available in your state.

The California Enterprise Zone (CAEZ) Program

Although the CAEZ program was repealed for employees hired and equipment purchased after December 31, 2013, businesses may continue to generate credit during the first 60 months of a qualified individual’s employment through the year 2018.

The California Competes Tax Credit

This discretionary state tax credit, which ranges in value between $20,000 and $8 million, may be claimed by qualified businesses that are located in California. Applicants compete for the pooled funds, while the program makes provisions to ensure small businesses are represented among companies that are awarded the credit.

The California New Employment Credit (NEC)

If your business is qualified to claim the California NEC, you receive reduced tax liability given you provide the right supporting documentation. The NEC requires a net increase in your total number of employees, and your company must also operate within a Designated Geographic Area (DGA).

An eligible business that hires 10 new employees, for example, could earn a tax credit up to $672,000 depending on the employees’ hourly pay rates. This tax credit is equal to 35% of wages during a new employee’s first year. In order to be eligible, these wages must exceed 150% of the minimum wage but must not exceed 350% of the minimum wage.

Documentation Security

It is crucial to retain documentation to support California state employment tax credits. You may be audited many years after you hire a qualified employee, and your audit representative must provide proof that you are qualified to claim the credit.

Partner With A Tax Consultant

While accounting professionals at your company are often indispensable, pursuing many tax solutions requires a tax expert’s knowledge if you wish to gain savings. Tax consultants must be familiar with state employment tax credit requirements, deadlines and the application process.

Your business will need to provide its physical location address(es) and a small amount of employment information in order for your tax consultant to identify which tax benefits you are able to claim and what needs to be completed during the application process.

The right consulting partner should be experienced in pursuing tax savings strategies that help businesses like yours reduce tax liability and increase cash flow. If you have questions about other tax solutions available to you, speak with a tax expert at Corporate Tax Incentives.

Ready to learn about other employment tax credit programs? Download your complimentary, educational guide discussing the Federal Work Opportunity Tax Credit.

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Topics: Employment Incentives

Rose Davidson

Written by Rose Davidson

Rose is the Director of Credits and Incentives for the Southeast area. She has over 12 years of experience in federal and state tax credits and has deep technical knowledge of many federal and state tax credit programs, including the Federal Work Opportunity Tax Credit, the Federal Empowerment Zone Employment Credit, various state enterprise zone credit programs and Georgia statutory tax credits.

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