For those of you with 100 or fewer employees, who have endured lower revenues at this time, we have some good news. California is providing a new tax credit for small businesses that might help you.
The tax credit is available for the tax year 2020 only (for now), and is targeted toward businesses that were forced to lay off employees or dramatically reduce work hours earlier this year. If you’re now rehiring those employees, hiring new employees, or increasing work hours, this credit might help you.
In order to qualify, you must employ 100 or fewer employees (including part-time workers) as of December 31, 2019. You also must have experienced a 50 percent decrease in gross receipts from April 1, 2020 to June 30, 2020, as compared to April 1 to June 30 of 2019.
Business owners must reserve the credit with the California Department of Tax and Fee Administration. Reservations began on December 1 and will be taken until January 15, or whenever the $100 million credit allocation is reached.
The tax credit will amount to $1,000 for each net increase in qualified employees, up to a $100,000 maximum.
Take note: We believe the $100 million credit allocation will be reserved well before January 15, so we strongly recommend applying for this credit right away.
Contact your CPA now, to make sure that you can qualify for this credit. They will help ensure that you can reap the maximum amount of credit available, by counting your gross receipts and employees accurately.
You can find more information on this credit, including the documentation that you need to present, on the California Department of Tax and Fee Administration website.