A Quick Guide to the California New Employment Credit

November 1, 2019

Did you know that you can be rewarded for hiring new employees in the state of California? The California New Employment Credit (NEC) took over the former Enterprise Zone hiring tax credit from 2014 to 2020. Employers that qualify and who hire full-time employees that qualify can receive credit for creating jobs. An Encino accountant can help you determine if you are eligible, but this quick guide serves as basic information.

The Process of Hiring the Employee

When the employer has an employment offer in a new location, the company must put the offer for the location in writing and provide it to all employees from the old employment location. Small businesses, which are defined as having under $2 million in gross receipts in the previous year, do not need to provide this written notification. Only after all previous location’s employees are notified can the employer begin the process of hiring.

Qualified Employees Defined

Los Angeles accounting experts state that qualified employees must meet several provisions. First, they must have been unemployed for six months prior to the date of hire (or have graduated from college 12 months prior). Veterans qualify if they have been unemployed for up to a year since leaving active duty. Other qualified employees may be those who received the Earned Income Tax Credit in the prior year, receive benefits from CalWORKS or welfare, or who are ex-felonious offenders.

Some Businesses May Not Be Eligible

If you own a temporary staffing agency, retail business, or food service business, you are not eligible for the credit unless you fall into the small business category. Other ineligible companies include casinos and bars or lounges.

If you’d like more information about the qualification process, seek a reputable accountant service Los Angeles. A qualified accountant can look at your financials and the legal implications of your business to ensure you receive your credit of up to $56,000 per employee.