Wisconsin 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
As 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 8850 22.2 KB are available
from the IRS or online.
Wisconsin
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