(This article originally appeared in Entrepreneur)
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Amazon is currently looking for 1,000 workers at a Delaware facility and is willing to pay hiring bonuses of up to $3,000 to get them.
Like so many other businesses around the country, the online giant is desperate for labor. You may think that Amazon has a competitive advantage because it can afford to pay these hiring bonuses thanks to its vast financial resources. However, that’s not entirely true.
Sure, the company has vast financial resources to afford hiring bonuses. But if you’re a small business owner, you can match Amazon’s offer. Maybe even exceed it. And better yet, the federal government will foot the bill.
It’s called the Work Opportunity Tax Credit, and thanks to recent stimulus legislation, it’s been extended through 2025. Used the right way, it can be a powerful hiring tool that will enable you to recruit those much needed employees.
The tax credit can be worth up to $9,600 per new employee hired. It gets applied against the taxes your company owes and can be carried back to last year’s return — or carried forward 20 years if the credit exceeds your tax liability. Pass-through entities like S-corporations and partnerships can use it as well, and even non-profits can take advantage because the credit can also be applied to offset payroll taxes.
How to get your money
When you’re about to hire a new employee, call up your accountant and get Form 8850completed in advance. This form is a like a pre-qualification and serves to make a written request to your state workforce agency. Here is where you make your case that the worker is eligible for the credit.
The list of eligible workers includes ex-felons, qualified social security insurance recipients, or those that have been receiving long-term welfare assistance from the government. More importantly, the credit can be used for anyone that’s been unemployed for more than six months. Sound familiar? It’s no secret that lots of people are going to be coming off unemployment this fall as extra federal benefits expire.
Your accountant can do the math on the form and tell you how big of a credit you will get when you file your taxes at the end of the year.
Let’s say you’re eligible for a $5,000 credit based on the employee’s starting wages (the credit ranges from $2,400-$9,600 and is usually calculated based on 40% of an employee’s wages). Now go back to that prospective worker and tell him or her that you’ll give them a $4,000 hiring bonus if they come to work for you and stay for at least 400 hours — which is what the IRS requires for your company to be fully qualified.
That’s more than Amazon, and who’s going to turn that offer down? If you do the math right, you can get that great worker to join your company and even put a few extra dollars in your pocket come tax time.
