Employee Retention Credit Offers Help for Employers in the Go Zone
While the media makes much of the many bonuses and incentives offered to
developers in the Go Zone, many have overlooked the enormous amount of help
for employers in the Go Zone. Although the desire across the nation to rebuild
the areas most-affected by Hurricanes Katrina, Wilma, and Rita in 2005Alabama,
Mississippi, Texas, Florida and Louisianais noble, many businesses that were
present before the devastation were left wondering how to pick up the pieces.
The Go Zone Act of 2005 answered that question by offering employers actively
involved in trade before the hurricanes to claim the Employee
Retention Credit. Through this, employers are eligible for a credit of 40%
of each employees annual wages (with a limit of $6,000) paid or incurred before
January 1, 2006. However, keep in mind that this credit only runs from when a
business was made inoperable (or lost significant business) after Katrina,
Wilma, or Rita; and up until the business resumes significant operations. Put
simply: Business owners who suffered little or no damage, or who did have any
payroll expenses before January 1, 2006, are not eligible of the employee
retention credit, or help for employers in the Go Zone.
In addition, there are specific cut-off dates based for employer in each
Go Zone region. For example, those in the Rita Go Zone can only claim wages
paid or incurred after September 23, 2005; Katrina Go Zone employers can only
claim wages paid or incurred after August 28, 2005; and those affected by Wilma
can only claim wages after October 23, 2005.
Keep in mind that there are also eligibility requirements for employees, which
can affect whether or not a business is eligible for the Employee Retention
Credit. An employee need not have been actively working (for example, some may
have been on vacation or leave) or at the principal place of business to qualify
a business for the credit. For example, if a Los Angeles-based firm had a
subsidiary office in a qualifying Go Zone, the wages paid to employees at that
subsidiary would be eligible for a credit.
So, it pays for any business actively dealing prior to the catastrophic
hurricanes of 2005 to check into eligibility requirements for the Go Zone
Employee Retention Credit. Those who are eligible can receive a substantial tax
credit, which reduces tax liability dollar for dollar.
Without a doubt, the importance of rebuilding the Go Zone areasand attracting
new development to do socannot be overlooked. However, those businesses that
dipped their toes in the sand of the Gulf Shore before the hurricanes made their
mark have a unique opportunity to not only keep their fiscal heads above
waterbut also begin their own rebuilding process. In addition, employees are
given job security as businesses are less burdened with payroll demands. Through
the Go Zone Actand the Employee Retention Credithelp for employers in the Go
Zone is on its way.
Interested in learning more?