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These Two Tax Credits Could Save Your Dairy Thousands

Taylor Leach

December 1, 2021

Dairy farmers have to deal with headaches on a day-to-day basis, and with tax season coming, those headaches could soon escalate. But according to Gene Marks, a business consultant with Marks Group PC, there are two tax credits available to dairy producers this tax season that could help save them thousands of dollars.

Employee Retention Credit

“There are two enormous tax credits that are available to everyone in [the dairy] industry to help pay for your labor and pay for your hiring bonuses,” Marks says. “The first is called the Employee Retention Credit. If any farmer was either fully or partially shut down because of COVID 2020 or 2021, or if you did suffer a revenue decline of more than 20% in any quarter of 2020 and 2021 through September 30, you can get a credit back on a payroll tax that you've paid for your employees. So, you definitely want to talk to your accountant about that,” Marks says.

According to Government Aid, the Employee Retention Credit (ERC) is a stimulus program designed to help those businesses that were able to retain their employees during the COVID-19 pandemic. It is available for 2020 and for three quarters of 2021. You can claim up to $5,000 per employee for 2020. For 2021, the credit can be up to $7,000 per employee per quarter.

But how do you know if your business is eligible?

According to Government Aid, to qualify your business must have been negatively impacted. Some of the factors to consider:

  • A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.

  • Gross receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.

  • A business can be eligible for one quarter and not another.

  • Initially, under the CARES Act of 2020, businesses were not able to qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.

Work Opportunity Tax Credit

Another opportunity to save some money comes from the Work Opportunity Tax Credit. According to the Corporate Tax Incentives, the work opportunity tax credit (WOTC) program is a federal government initiative designed to increase employment opportunities for people who typically experience certain barriers to employment, such as veterans, public assistance recipients, or ex-felons.

“If you hire somebody now through 2025 and that person is out of prison, if that person is off of welfare, if the person is out of the military, or most importantly, if that person has been unemployed for more than six months, you can get up to a $9,600 tax credit just for hiring that employee,” Marks says.

In order to claim this credit, an employee must complete IRS Form 8850 on or before starting the job. The Form 8850 must be postmarked within 28 days of start date and sent to the state Department of Labor for certification.

Some of the employees who could help you qualify for this tax exemption include:

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