02.23.16 |
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The Extension of the Indian Employment Tax Credit

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Following President Obama’s signature of the Consolidated Appropriations Act (the Act)[1], an array of tax credits and incentives were extended through 2016 that offer businesses an opportunity to offset their federal tax liability. With the passage of this Act, one tax credit that was extended is the Indian Employment Tax Credit, which is available to businesses that employ workers who are an enrolled member of an Indian tribe (or whose spouse is an enrolled member of an Indian tribe), live on or near a reservation and perform substantially all of their services for the employer within the reservation.[2]

Now extended through December 31, 2016, this credit was put into effect to encourage businesses to employ members of Indian tribes who live on or near reservations, which could help diversify their workforce and improve business operations in certain areas of the country.[3]

Employees who make more than $40,000 per year are nonqualified for this particular credit, and employers only qualify for the credit based on the first $20,000 of qualified wages and health insurance costs that are paid to qualified employees.[4] The credit can reach up to $4,000 per employee, which could potentially contribute a significant sum toward reducing a business’ overall tax liability.[5][6]

The Indian Employment Tax Credit is just one example of the various tax credits extended through 2016.  There are multiple tax credits and incentives for different hiring, training and investing practices for which businesses may be eligible, but keeping track of the requirements associated with these credits can be a cumbersome task. That’s why it is crucial for employers to invest in comprehensive resources and tools to help track, manage and capture incentives like these.

Click here to learn more about ADP’s Tax Credits module and how it can help businesses identify and capture tax credits and incentives for which they are eligible, offset costs and lower their effective tax rate.

 
Learn More About ADP SmartCompliance® Tax Credits
 


The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.

[1] H.R.2029 – Consolidated Appropriations Act, 2016 – https://www.congress.gov/bill/114th-congress/house-bill/2029/text#toc-HF0ADDF1B9D2541B3B0E4274939F777A0

[2] 26 USC 45A: Indian employment credit – http://uscode.house.gov/view.xhtml?req=(title:26%20section:45A%20edition:prelim)

[3] IRS ITG FAQ – https://www.irs.gov/Government-Entities/Indian-Tribal-Governments/ITG-FAQ-%231-Answer-What-is-the-intent-of-the-Indian-Employment-Credit-(Section-45A)%3F

[4] 26 USC 45A: Indian employment credit – http://uscode.house.gov/view.xhtml?req=(title:26%20section:45A%20edition:prelim)

[5] Tax Credit Services, 2016 – http://www.taxcreditservices.com/indianemployment.html

[6] 26 USC 45A: Indian employment credit – http://uscode.house.gov/view.xhtml?req=(title:26%20section:45A%20edition:prelim)


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