Yardley CPA Posted May 27, 2016 Report Share Posted May 27, 2016 I have a client, New Jersey Schedule C, who is a landsccapper with about 20 employees. A couple of questions pertaining to his business: 1. He was involved in a lawsuit brought by a client. He agreed to a $20,000 out of court settlement. Wondering if that amount is something that is deductible for him? 2. Also (and maybe this is why he has lawsuits) he hired an ex-convict (did not know the individuals past). He heard there may be some tax advantages afforded to him for hiring someone who was previously incarcerated. I am not aware of any but wanted to see if anyone knew. Thank you. Quote Link to comment Share on other sites More sharing options...
Pacun Posted May 27, 2016 Report Share Posted May 27, 2016 Yes, the 20K are deductible because it was not a penalty or fine. That's normal business practice and/or expense in this suing society. 2.- I think they are referring to a program in 2010 that expired and it was for hiring unemployed or part time individuals. I don't think such an animal exists anymore. Quote Link to comment Share on other sites More sharing options...
Pacun Posted May 27, 2016 Report Share Posted May 27, 2016 One more detail... did you hit the receiver with a $20K 1099-misc? You should check that. Quote Link to comment Share on other sites More sharing options...
Catherine Posted May 27, 2016 Report Share Posted May 27, 2016 Form 3800 employment credits. Specifically, work opportunity credits. Form 5884 that then flows to Form 3800. WOTC Chart Form 5884 at IRS site 2 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted May 27, 2016 Report Share Posted May 27, 2016 Also see this IRS page on the WOTC and additional requirements on the employer to verify that the employee is in one of the targeted groups: https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit-1 Because this was retroactively extended, there's transitional relief with extended dates for Form 8850 described in Notice 2016-22. Links to those are also on that IRS page. The deadlines differ by target group, but all are coming up in a couple of days or about a month depending on which group it is. Form 8850 is used by the employer to request certification from the state agency for each employee that certifies that the employee is a member of the targeted group. 3 Quote Link to comment Share on other sites More sharing options...
Yardley CPA Posted May 27, 2016 Author Report Share Posted May 27, 2016 Thanks very much for the replies! 1 Quote Link to comment Share on other sites More sharing options...
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