I'm sure one of your biggest challenges this year is finding and retaining good people. Did you know that the Internal Revenue Service can help? No, this is not a joke. Just by understanding some of the more detailed parts of the tax code, you can offer certain tax-advantaged benefits that may help in your recruiting efforts while at the same time keeping your existing employees happy.
Of course, here's the usual disclaimer: Even though I'm a certified public accountant, don't completely trust everything I write here -- check with your accountant to make sure the facts specifically apply to your business. If they do -- even for some -- then try a few of these tactics.
1. Hire the people who have a hard time getting a job.
The IRS wants to help you hire people who need help being hired. Using the Work Opportunity Tax Credit, you can get up to a $9,600 credit on your taxes for the first year wages of certain kinds of employees you hire such as veterans, ex-felons, those in vocational rehab, food stamp recipients, and people who have been unemployed for more than 27 weeks. Although the top credit is $2,400 (40 percent of first year wages up to $6,000), you can get an even bigger credit if you hire a veteran with a service-connected disability.
2. Hire an active member of the military.
Under the Employer Wage Credit for Activated Reservists, you can get a credit of up to $4,000 if you're paying an active military person more than what they're earning from the government.
3. Get a credit for disabled access.
You can reach out to more physically disabled people, because the IRS will give you up to a $5,000 credit toward the costs you incur for building better access (ramps, etc.) to your facility. This is only applicable to businesses with less than $1 million in revenue and no more than 30 employees, however.
4. Recruit nonlocal employees.
Don't be afraid to recruit outside of your geographical area, and if you find the right person for the job make sure that person knows that he or she can fully deduct their unreimbursed moving costs, just so long as certain tests are met (they have to be moving more than 50 miles and the new job must require them to be at your office for more than 39 weeks a year). Your business can take a deduction for any costs you incur in the move at the same time.
5. Help your employees care for dependents.
Every year, you can give an employee up to $5,000 to help them with care for a dependent. You get the deduction and they don't have to report it as income. Just make sure you've got a formal plan in place and it's not discriminatory. While you're at it, tell your employee that -- thanks to the 2017 tax reform -- they can get a credit for as much as $2,000 of their out-of-pocket dependent care expenses related to any child under the age of 13 and that credit's available even if you're married and earning up to $400,000 a year.
6. Give them tuition money.
College is hard. Training is needed. You can help. If you reimburse your employee for any educational expenses -- it doesn't even have to be job related -- you can deduct up to $5,250 per year and your employee doesn't have to report it as income. As above, this can't be discriminatory -- in other words, no more than 5 percent of these payments can be for owner-employees, spouses, or your dependents.
7. Give your employees some help with adoption.
Sometimes couples can't have kids, no matter how hard they try, and this can be a very tough situation. You can help ease the pain by paying for up to $13,750 per child for adoption expenses. The amount is deductible for your business and your employees don't have to report it as income. There is a phaseout, and as above you should have a formal, non-discriminatory plan in place.
8. Start an HSA.
Health savings accounts have been super popular over the past few years as both employers and employees look for ways to control their health care costs. An HSA is like a 401(k) for your health costs. Your employees can contribute pretax money to the plan. You can do the same for them. The money grows tax free and then can be withdrawn to pay for out-of-pocket and deductible expenses not covered by your plan. Contributions are maxed at $3,450 per year ($6,900 for a married couple) and employees over 55 can contribute an extra grand. Whatever is left at the end of the year carries over, too.
9. Start a defined contribution plan.
Thanks to the new tax bill, if you've got less than 100 employees you can now get a $500 tax credit for three years if your start a 401(k) plan. In addition to that plan, consider offering a 529 plan, which lets you and your employees contribute after-tax money that can grow tax free and be used to fund future education. Or a profit-sharing plan. Or an employee stock ownership plan (ESOP) if you're thinking of cashing out in a few years.
10. Pay your executive more through a nonqualified plan.
With a plan like this, you can pay your top people bonuses, stock awards, and other types of deferred compensation that they'll earn and vest as they work with your company. If you structure your plan right -- in most cases -- the compensation can be nontaxable until an event occurs (i.e., anniversary date). That way, your top people can, well, kind of "get" their money but not incur a tax liability immediately.
See that? And you thought the IRS were bad guys. That's not the case. With a little planning and after a few discussions with your accountant, you can leverage some of these tax rules to help you recruit and retain great employees.