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  • Wisconsin Lawyer
    March 31, 2008

    Practice Tips

    Tax credits can help employers offset the cost of accommodating an employee's disability, which may be just the incentive a business needs to help it diversify its workplace.

    Wisconsin LawyerWisconsin Lawyer
    Vol. 75, No. 11, November 2002

    Helping to Increase Diversity

    Tax Credits for Hiring Persons with Disabilities

    Tax credits can help employers offset the cost of accommodating an employee's disability, which may be just the incentive a business needs to help it diversify its workplace.

    by Theodore D. Kafkas

    Photo: Man in wheelchairAs a business law practitioner or a corporate counsel, could your client or company benefit from a tax credit when hiring an employee? As a personal injury attorney, is your client looking for new employment after a severe auto accident? Business law, tax law, and personal injury law could find an unusual intersection when these questions are asked regarding the same prospective employee or client with a disability.

    The Economic Incentive

    An employer may be eligible for a tax credit of up to 40 percent of the first $6,000 in qualified first-year wages paid to an employee in a targeted group.1 A little math shows a credit of up to $2,400 to an employer who hires a person in a targeted group. Of course, a tax credit is much more appealing than a tax deduction, and could be used to help offset the cost of accommodating a disability.

    Members of a targeted group include, among others, individuals with a vocational rehabilitation referral.2 An individual with a "vocational rehabilitation referral" is an individual who is certified by the designated local agency as:

    "(A) having a physical or mental disability which, for such individual, constitutes or results in a substantial handicap to employment, and

    "(B) having been referred to the employer upon completion of (or while receiving) rehabilitative services pursuant to -

    Theodore D. Kafkas, Marquette 1990, of Franklin, also holds a BBA summa cum laude in finance and real estate/urban development from UW- Milwaukee.

    "(i) an individualized written plan for employment under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973, or

    "(ii) a program of vocational rehabilitation carried out under chapter 31 of title 38, United States Code."3

    Dates relating to the "certification" also are important for the tax credit. The hiring date is defined as "the day the individual is hired by the employer."4 The special rules for certifications generally state that:

    "An individual shall not be treated as a member of a targeted group unless -

    "(i) on or before the day on which such individual begins work for the employer, the employer has received a certification from a designated local agency that such individual is a member of a targeted group, or

    "(ii)(I) on or before the day the individual is offered employment with the employer, a prescreening notice is completed by the employer with respect to such individual, and (II) not later than the 21st day after the individual begins work for the employer, the employer submits such notice, signed by the employer and the individual under penalties of perjury, to the designated local agency as part of a written request for such a certification from such agency."5

    For the above special rules of certification, prescreening notice is defined as "a document (in such form as the Secretary shall prescribe) which contains information provided by the individual on the basis of which the employer believes that the individual is a member of a targeted group."6 Form 8850 of the Department of Treasury, Internal Revenue Service, is entitled the "Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits."7 The IRS also has developed helpful instructions for Form 8850.8

    The Rewards Are Many

    What does this mean if you practice in personal injury? It might make you a hero to your client and help society when you bring a settlement check to your client and advise her to contact the State Department of Vocational Rehabilitation for help in getting a job.

    What does this mean if you are a corporate counsel or your law firm's hiring partner? Your company CEO and your partners likely will thank you for explaining the tax incentives to hiring a person with a disability and providing an opportunity to enhance corporate or firm diversity.

    Of course, corporate and firm diversity provides for additional viewpoints for business decisions. Obtaining additional viewpoints makes good business sense when dealing with a diverse public and clientele.

    We all have stereotypes and fears of people we do not know. Recognizing the stereotypes allows us to move beyond them to the reality. The goal of hiring the best person for the job has never been pushed out of sight. When the person with a disability is the best candidate for the job, this tax credit can help employers offset the cost of accommodating the disability.

    This article provides only a general overview of some tax and employment issues that could help attorneys involved in employment, corporate, or personal injury law. Numerous variables exist that could affect tax credits. In addition, other economic incentives also could exist. For information specific to your situation, contact a qualified tax/employment attorney.

    Endnotes

    1 I.R.C. § 51.

    2 I.R.C. § 51(d)(1)(E).

    3 I.R.C. § 51(d)(6).

    4 I.R.C. § 51(d)(10).

    5 I.R.C. § 51(d)(12)(A).

    6 I.R.C. § 51(d)(12)(A).

    7 Form 8850 is available from the IRS or on the Internet. A new Form 8850 is in development and the draft may also be viewed online.

    8 Instructions to current Form 8850PDF 22.2 KB are available from the IRS or online.



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