Client Alerts Illinois Small Business Job Creation Tax Credit

Publication
07.01.10

The Illinois Small Business Job Creation Tax Credit creates a $2,500 tax credit against withholding tax for small employers who hire new, full-time Illinois employees during the 12-month period beginning July 1, 2010. Who qualifies? An employer paying wages that has 50 or fewer full-time employees on July 1, 2010 and creates a new full-time […]

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The Illinois Small Business Job Creation Tax Credit creates a $2,500 tax credit against withholding tax for small employers who hire new, full-time Illinois employees during the 12-month period beginning July 1, 2010.

Who qualifies?

  • An employer paying wages that has 50 or fewer full-time employees on July 1, 2010 and creates a new full-time Illinois position.
    • For purposes of this credit, a full-time employee is one who works at least 35 hours per week.
  • To qualify, the position must pay at least $25,025 per year ($13.75 per hour) and be sustained for one year.
    • A particular individual does not need to be retained for one year, just the position needs to be sustained.
  • The 50 employee determination includes both Illinois and out of state locations, as well as “related” businesses.
  • New small businesses hiring their first Illinois employee(s) can qualify for the credit.

A person previously employed by the employer or who is a 5% or more owner or a “related” member does not qualify. Unlike the HIRE Act federal payroll tax forgiveness, the person hired does not have to be previously unemployed.

How to apply?

Eligible companies will apply for the credit online and ultimately will be issued a tax credit certificate. As soon as a new, full-time employee is hired and begins providing services, the application should be completed at http://jobstaxcredit.illinois.gov. The actual credits will be issued beginning July 1, 2011 on a first-come-first-served basis determined by date of application, so the application should be completed as soon as possible.

How is the credit calculated?

The net increase in jobs is determined by subtracting the total full-time Illinois employees on July 1, 2010 from the total on June 30, 2011. The credit is $2,500 multiplied by the net increase amount.

Other considerations

This is a credit against future withholding tax, so any type of entity paying wages can benefit from it, including not-for-profit organizations. The credits will not be issued until next year, but there is a statewide cap of 20,000 jobs or $50 million, so the date of the application will be very important.

This credit might provide your business with valuable tax savings but many rules apply, so please contact us for the details or to ask any questions.

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