Hiring On The Money

 

School is nearly out, and for many small companies that can mean a substantial rise in the number of summer-job applications. For employers hiring young and disadvantaged workers, it can also mean substantial tax credits.

Through the Targeted Jobs Tax Credit program (TJTC), enacted by Congress in 1978, businesses hiring economically disadvantaged workers (including Vietnam veterans, ex-convicts, and young people ages 18 to 24) are eligible for a tax credit equal to 50% of the first $6,000 of each employee's qualified wages during the first year of employment and 25% of the first $6,000 of each employee's qualified wages during the second year. The maximum tax credit per employee could total $4,500 -- $3,000 for the first year, plus $1,500 for the second year. The credit cannot be more than 90% of a company's tax liability, but any unused portion of the credit may be carried back 3 years and carried over 15 years.

This year, employers hiring young people from poor families qualify for a hefty one-time tax credit, equal to 85% of the first $3,000 paid to each newly hired 16 and 17 year old on the job between May 1 and September 15.

Here is how the TJTC program works:

* Workers are first certified as eligible by their state employment service.

* Proof of eligibility is then provided to the employer, who claims the tax credit.

By far the most popular category of the program applies to "economically disadvantaged" youths. And, because the state employment service determines an employee's economic category based on the Bureau of Labor Statistics's lower living standards, the category could apply to college graduates who have not worked full-time six months prior to taking the job.

But, as with almost any government program, TJTC has a catch. In this case, the trick involves making sure your new employee has been interviewed by the state employment service and is certified for the program on or before the first day of work. If for some reason an employee cannot be interviewed and certified prior to beginning work, the employee would still have a chance to qualify if the state employment service receives a written request for certification postmarked on or before the first day of work.

Good administration is essential for small companies that want to take full advantage of the program. In Salt Lake City, Sizzling Platter Inc., operators of 20 Sizzler Family Steak House restaurants, has been aggressively involved with TJTC since 1981. The company has certified more than 270 TJTC candidates, an average of 15 to 20 a month, and last year was eligible for more than $140,000 in tax credits. Ninety percent of the employees that qualified for the program were in the "disadvantaged youth" category.

Marketing administrator Karin Jackson spends half of her time overseeing the company's TJTC program, making sure restaurant managers follow up on employee certification. "The burden of responsibility is on the restaurant manager," she says. "Whoever is doing the hiring in the company, that's who can make or break the program." Part of the success, she believes, is due to the commitment of upper management to aggressively participate in the program. "Look at all the money [we've saved]."