Tax Credit May Apply for Businesses Damaged by a Federally-Declared Disaster

Did your business become inoperable from damage sustained during one of the 2018 or 2019 federally-declared disasters? If so, your business may be entitled to a tax credit.

If your company retained employees during the recovery period of one of the disasters, for example, Hurricanes Florence and Michael and the California wildfires, it could qualify for a credit of up to $2,400 for any employee retained and paid wages until the business location resumed operations, or until February 18, 2020—whichever comes first.

Eligibility Criteria

Eligible employees include those who meet either of the following criteria:

  • Employees who are unable to perform services but continue to collect wages
  • Employees relocated to other locations to resume their work

The credit is available as a one-time credit for each employee and can’t be used in conjunction with the Work Opportunity Tax Credit for the same employee.

Businesses don’t need to file any applications for the credit, but they must maintain proof of the company’s inoperability and be able to demonstrate employees performed substantially all of their duties at the location until it became inoperable. 

Disaster Zones

Qualified disaster zones are areas determined by the president, in which a major disaster was declared and assistance was provided by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

How to Calculate the Credit

If your company operates in a designated disaster zone, you can calculate and claim disaster tax credits, as well as other federal and state hiring and wage-based tax credits.

To start, we’ll work with you to determine if your business qualifies using a proprietary web-based tool called MaxCredits©. We’ll then help you claim the credit, using the following process:

  • Collecting and reviewing the necessary documentation and payroll to determine each employee’s eligibility and identify limitations on wages used for other general business credits
  • Preparing a final report with detail on claiming the credit on the appropriate schedule

In addition to calculating the disaster credits, you can also determine if your business qualifies for other federal hiring credits, including:

  • Work Opportunity Tax Credit
  • Employer Paid Family and Medical Leave Credit
  • Federal Empowerment Zone Credit
  • State-level hiring and wage-based credits

We’re Here to Help

For more information or help determining if your business qualifies for the tax credit, contact your Moss Adams professional.