Sunday, February 12, 2012

Wisconsin's Job Creation Deduction

Upon reviewing tax returns from other accounting firms and self-prepared tax returns, certain deductions and credits are missed on a regular basis. New deductions top the list along with state specific credits. When a new deduction shows up on the state tax return, opportunities are often overlooked.

Wisconsin's new Job Creation Deduction (Schedule JC) allows most employers a $4,000 deduction per full-time employee added in 2011. Large businesses (over $5,000,000 in revenue) only get a $2,000 deduction per new full-time employee equivalent.

Schedule JC is easy to prepare. Most software does a good job handling the deduction with problems coming from flow-through entities and calculating the full-time employee equivalent. These problems are solved with a manual entry. Even if a business added employees later in the year, it is still possible to get the deduction. The hardest part is determining what a full-time employee equivalent is. Simply stated, a full-time employee equivalent is an employee that is required to work 2080 hours per year, including hours from holidays and vacation. The employee may work fewer hours as long as they are required to work the required hours. Employees can be terminated for any reason and the deductions still applies while they worked. New employees are accounted for pro-rata.

You will need your unemployment reports for 2010 and 2011 for calculate the deduction. Schedule JC is a short form with few entries. Follow the instructions for determining how many full-time equivalent employees you have. If you have more in 2011 than 2010, you get a deduction.