How to Qualify for New York’s Minimum Wage Reimbursement Tax Credit

July 31, 2014 – On December 31, 2013 the New York minimum wage rate increased to $8.00 per hour and will continue to increase annually until reaching $9.00 per hour on December 31, 2015. This increase makes the New York minimum wage higher than the current federal minimum wage of $7.25 per hour.

In an effort to help businesses counterbalance this increased expense New York has developed the minimum wage reimbursement credit for tax years beginning on or after January 1, 2014 and before January 1, 2019.

The minimum wage reimbursement credit is a refundable credit available to employers who employ an eligible employee. An eligible employee is one who is:

  • employed by an eligible employer in New York State;
  • paid at the minimum wage rate;
  • at least 16 but not yet 20 years of age; and
  • a student during the period he or she is paid at the New York minimum wage rate by eligible employer.

A student, for this purpose, is someone who is currently enrolled full-time or part-time at an eligible educational institution that is located either inside or outside New York State.  It is the responsibility of the employer to obtain proper documentation verifying the employee’s current enrollment at an eligible educational institution.

The credit amount is determined by multiplying the tax credit rate for the given year by the total number of hours worked by eligible employees at the New York minimum wage rate. For tax years beginning on or after January 1, 2014 and before January 1, 2015 the tax credit rate is $.75 per hour. This rate is schedule to increase up to a maximum of $1.35 per hour for tax years beginning on or after January 1, 2016 and before January 1, 2019.  Furthermore, the tax credit rate will be reduced to the difference between New York’s minimum wage and the federal minimum wage if the federal minimum wage is increased to more than 85% of New York’s minimum wage.

Employers need to be aware: terminating an ineligible employee in order to hire an eligible employee with the only intent being to qualifying for the credit will result in the credit being disallowed for all eligible employees.

Please contact Kathryn Mellon at kmellon@dopkins.com or your Dopkins Tax Advisor with any questions.

About the Author

Katie Mellon CPA

A Tax Advisory Group Manager, Katie specializes in corporate and personal tax returns, financial statements, and accounting services.

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