Frequently Asked Questions

What are these employment credits?
The Empowerment Zone Employment Credit and the Renewal Community Zone Employment Credit are special federal tax credits available to companies located in or conducting projects in, and who hire residents of an Empowerment Zone or a Renewal Comunity Zone. These zones were first established as a result of the 1993 Federal Omnibus Budget Reconciliation Act and designed to create jobs and opportunities in our nation’s most impoverished urban and rural areas.

Why did the government create these credits?
The Federal Government enacted these Tax Credits to encourage employers to locate and/or expand their
business in a Federal Renewal Community Zone or Empowerment Zone and hire and retain residents
of these zones.

How much is the credit?
A maximum credit of $1500 per year (15% of the first $10,000 of income) per qualified employee (a zone
resident) for the Renewal Community Zone credit and $3,000 per year (20% of the first $15,000) for the Empowerment Zone credit may be claimed. Qualifying employees must work a minimum of 90 days
in order to be considered a “qualified” employee.

Where are these zones?
There are approximately 20 Renewal Community Zones and 40 Empowerment Zones in the US.

Will current employees qualify?
As opposed to other employment based federal credits, these credits apply to both existing and new employees. Further, these credits may be available retroactively. You are not required to obtain information from employees, the only information required to qualify employees is generally available from payroll records or your HR department.

Can the credit be claimed for former employees?
Employees no longer with your company may generate a credit if they meet the residence and 90-day tenure requirements. In addition, if you elect to file retroactively for the credit, former employees may also qualify.

When and how does a company claim the credit?
An employer can use these tax credits to reduce their federal income tax liability, subject to IRS guidelines on the use of income tax credits. Refer to IRS Form 8844 and the General Instructions on how to claim your credit. Even if the employer is paying federal income tax on the Alternative Minimum Tax (AMT) basis, a portion of the AMT can be reduced by these credits.

What is National Tax Professionals’ Process?
When the Client provides us their year end payroll information, we have developed proprietary software
that allows us to determine “qualified” employees and calculate the exact amount of your credit. A statement by each location will be provided to you. We will also work with your tax advisor to ensure the maximum credit is claimed.

When and how can I claim the credit for prior years?
On average, the process of calculating the credit and producing reports for prior years takes no longer than the calculation of the current year credit. An amended federal return for the earlier years is required to be filed to claim the credit and the receipt of your refund from the IRS will vary by the time of year. You should speak with your tax advisor for answers specific to your situation.

How do we get started?
Please contact National Tax Professionals to determine if the credit is available to your business. We can determine if you are qualified for the credits and provide you with preliminary estimates of the credits your company will earn. To get further information, email us today.