Businesses with 100 employees or less are eligible for California’s new Small Business Hiring Credit, equal to $1,000 per net increase in qualified employees. Businesses that have been negatively impacted by COVID-19 and hired or re-hired employees should be eligible to reserve a tentative credit. Each qualifying small business is eligible to receive up to $100,000 for this credit.
The California Department of Tax and Fee Administration (CDTFA) began taking credit reservations on December 1, 2020 continuing through January 15, 2021 or when the $100 million of available credit is exhausted, whichever comes first. We advise you to reserve the credit as soon as possible, before funds run out.
Limitations and Requirements
Taxpayers should reserve the credit if they are claiming the credit against their personal income, corporation franchise or income taxes or against sales and use taxes. This credit is only available for the 2020 tax year.
Small businesses must meet the following requirements:
- As of December 31, 2019, your business employed 100 or fewer employees; and
- Your business had at least a 50% decrease in gross receipts when comparing the second quarter of 2019 to the second quarter of 2020.
Newly hired employees that qualify for this credit are based on their full-time equivalent (FTE) that were employed during the following periods:
- April 1, 2020 – June 30, 2020 (3-month period)
- July 1, 2020 – November 30, 2020 (5-month period)
Once you apply to hold your credit reservation, the CDTFA will notify you within 30 days if you qualify and for how much.
We Can Help
If you have questions about how this credit can affect your tax returns, please contact RJI CPAs.