Tax Credit for California Small Businesses

To help small businesses climbing back from the financial devastation caused by COVID-19, California introduced a new type of tax credit. It is for small businesses and can only be used for the 2020 tax year. Known as the Main Street Hiring Credit, it helps companies that were forced to lay off employees or drastically reduce employees’ hours early in 2020 and have since rehired them, hired new employees, and/or increased workers’ hours.

In order to qualify, business owners must make a reservation through the California Department of Tax and Fee Administration. These reservations are taken on a first-come, first-served basis, starting December 1, 2020, until January 15, 2021, or when the $100 million credit allocation is reached.

Although recent announcements indicate that the $100 million might be increased, we strongly recommend reserving your credit early in December. As a point of reference, as of 8:00 am on December 2, $16.3M of the credit has already been claimed.

The credit is equal to $1,000 for each net increase in qualified employees, up to $100,000 maximum per taxpayer, but can only be claimed by businesses that:

• Employed 100 or fewer employees (all employees, including part-time employees) as of December 31, 2019; and
• Experienced a 50% decrease in gross receipts from April 1, 2020, through June 30, 2020, compared to April 1, 2019, through June 30, 2019.

The net increase is measured by comparing the taxpayer’s average number of monthly full-time equivalent (FTE) employees for the second quarter of 2020 with the average number of monthly FTE employees for the five months beginning July 1, 2020, and ending November 30, 2020.

We know $1,000 per employee may not be life-changing money, especially if you have experienced a severe revenue drop, but every dollar can help during these strange times. You can reserve the credit online or contact your JLK Rosenberger team member to assist you in qualifying.

To reserve the credit yourself, you will need your basic business information (including EDD payroll account number) along with employee and revenue figures. Go to this website and click the “Request Tentative Credit Reservation Online Now” button.

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