The Protecting Americans from Tax Hikes (PATH) Act of 2015 provides an extension and modification of several taxpayer-friendly provisions applicable to employers. These credits and benefits are intended to encourage new hiring and to improve employment opportunities for broader classes of individuals, including veterans and working families.
In addition, in order to improve compliance, the PATH Act accelerates the due date for filing Form W-2 and information returns for nonemployee compensation for tax years beginning after 2015.
Work Opportunity Tax Credit
The work opportunity credit for all targeted groups is extended five years and may be claimed with respect to wages paid to persons who begin work for the employer on or before December 31, 2019. In addition, the credit is expanded and available to employers who hire individuals who are qualified long-term unemployment recipients who begin work for the employer after December 31, 2015.
Under the Work Opportunity Tax Credit (WOTC), employers hiring an individual within a targeted group (otherwise hard-to-employ workers) are eligible for a credit generally equal to 40 percent the qualified worker’s first-year wages up to $6,000 ($3,000 for summer youths and $12,000, $14,000, or $24,000 for qualified veterans, providing certain requirements are met). For long-term family aid recipients, the credit is equal to 40 percent of the first $10,000 in qualified first year wages and 50 percent of the first $10,000 of qualified second-year wages.
Empowerment Zone Employment Credit
Empowerment zone employers are entitled to a credit against income tax for qualified wages paid to eligible employees in empowerment zones through the end of 2016. Generally, the 20-percent credit applies to the first $15,000 of qualified wages for a maximum credit of $3,000. Eligible employees must be full- or part-time employees who are residents of the empowerment zones and who performed substantially all of their employment services within the zone.
Differential Wage Credit for activated military reservists
When members of the National Guard or Reserves are called up to active military duty, their civilian jobs and salaries are placed on hiatus and they begin receiving military pay. If a member’s civilian salary is higher, the civilian employer might voluntarily provide military differential pay in an amount equal to the difference between the member’s civilian pay and military pay. An eligible small business employer can claim a tax credit for up to 20 percent of the military differential wage payments it makes through 2015. The credit has been made permanent and is also no longer limited to eligible small business employers with less than 50 employees for tax years beginning after December 31, 2015.
Indian Employment Tax Credit
The Indian Employment Tax Credit is equal to 20 percent of the employer’s costs for a qualified employee’s wages and health insurance paid or incurred during the tax year that exceed the amount the employer paid or incurred for such costs during 1993. A qualified employee is an employee (or spouse) that is an enrolled member of an Indian tribe that performs substantially all of the services within the Indian reservation, and their principal place of abode while employed is on or near the reservation where they are working. This credit is extended by the PATH Act through December 31, 2016.
Parity for employer-provided mass transit and parking benefits
The increase to the monthly exclusion amount for van pool benefits and transit passes provided by an employer to an employee, so that these two qualified transportation fringes match the monthly exclusion amount for qualified parking, is made permanent by the PATH Act. Therefore, for 2015, the monthly limit on the exclusion for combined transit pass and vanpool benefits is $250, the same as the monthly limit on the exclusion for qualified parking benefits. Similarly, for 2016 and later years, the same monthly limit will apply on the exclusion for combined transit pass and vanpool benefits and the exclusion for qualified parking benefits.
Accelerated Due Date
For calendar years beginning after 2015, certain information returns must be filed by January 31, generally the same date as the due date for employee and payee statements, and are no longer eligible for the extended filing date for electronically filed returns (March 31).
Specifically, the PATH Act accelerates the filing of Form W-2 and information returns for nonemployee compensation. The due date for employee and payee statements remains the same. Nonemployee compensation generally includes fees for professional services, commissions, awards, travel expense reimbursements, or other forms of payments for services performed for the payor’s trade or business by someone other than in the capacity of an employee.
If you have any questions related to the PATH Act provisions affecting employers, please call our office. We are happy to assist you.