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Will work for tax breaks

Employers can secure tax breaks by hiring

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07/19/2010

By Blake Christian

(Page 1 of 2)

With California unemployment hovering at 13 percent and the national unemployment rate still above 9.5 percent, long-term unemployment is clearly one of the biggest challenges for the U.S. economy.

The human and financial toll on the unemployed individuals and their families, however, can overshadow the national and state impact associated with the extremely weak job market.

Both unemployed (including some recent graduates) and certain currently employed Individuals looking for work can dramatically increase their attractiveness to prospective employers by highlighting certain tax breaks that employers can secure by hiring them.

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A majority of businesses are seldom familiar with the wide variety of incentive credits. Those that do know about them tend to materially understate the benefits and often claim nothing at all. So the employee who is aware of what they can bring to the table will often be providing their future employer valuable information.

It is recommended that employees highlight the applicable hiring credit on their resume, and work this into the interview to improve their chances of being hired. National Tax Credit Group has created a "Tax Credit Card," which they issue to prospective employees after screening them for hiring credit eligibility.

The City of Long Beach, Calif., also uses this system through their Workforce Investment Board and incorporates the state and federal credit programs into their training and employer outreach.

To illustrate, if an employee can generate a $10,000 state enterprise zone or other credit for their employer, their $30,000 annual salary effectively drops to $20,000 for the first year. That is a 33.3 percent decrease in labor costs. The new federal HIRE Act tax breaks (discussed in more detail below) can provide a 6.2 percent reduction in payroll taxes for the eligible employee and also generate a $1,000 hiring credit if the employee stays employed for a full year.

These tax benefits generally come in the form of a variety of federal, state and local hiring credits, training grants or payroll tax breaks. The incentives can provide an employer with economic benefits of up to $15,000 per year, depending on the specific program and the profile of the employee.

These hiring credit programs have been around for decades and were established to encourage businesses to hire economically disadvantaged taxpayers (e.g., the unemployed, those with family income near the poverty level, those recently discharged from the military, etc.). There are also thousands of residential regions throughout the U.S. that can qualify the employer for hiring credits for hiring employees residing in these designated areas.

California's enterprise zone program includes 42 reasonably large regions and hiring credit criteria currently include over 13 distinct methods for qualifying employees for the credit. Similar to other programs, employees living in certain economically challenged areas, those currently unemployed or those threatened with lay-offs, military veterans, and employees participating in various federal or state programs such as welfare, food stamps, etc., can generate credits up to $13,000 per year for an employer operating in a zone.

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