Indian Employment Credit

What is the Indian Employment Credit?

The Indian Employment Credit is a monetary incentive as a tax credit offered by the United States federal government to employers who hire registered Native Americans, alluded to as "Native American Indians" or "American Indians" in Internal Revenue Service (IRS) documentation, and spouses of registered Native Americans, who live on or close to a Native American reservation and work for an employer on that reservation.

The tax credit gives a 20% tax credit on qualified income and benefits, and is intended to make an incentive for employers to hire certain workers. The Indian Employment Credit initially expired December 31, 2007, yet has been extended over and over by acts of Congress and is in effect starting around 2020.

Understanding the Indian Employment Credit

Albeit the wording behind the Indian Employment Credit could utilize an update, the expectation of the credit it is to make more incentives for employers to hire a generally distraught group. The Indian Employment Credit is a tax credit offered by the United States government through the IRS to employers who hire Native Americans or spouses of Native Americans who live on or close to reservations. Employers are permitted to deduct qualified wages and qualified employee health care coverage costs for each qualified employee they hire.

For the reasons for the Indian Employment Credit, qualified wages are wages paid to a qualified employee with the exception of those that meet all requirements for the Work Opportunity Credit reported on IRS Form 8845. Qualified employee health insurance costs are costs paid or incurred by an employer for health care coverage for a qualified employee while the employee is a qualified employee. A qualified employee must be an enrolled member or spouse of an enrolled member of a Native American clan, perform employment duties on a reservation and live on or close to a reservation.

A few Native American employees won't qualify the employer for the tax credit, including those whose wages from the company don't meet a certain threshold determined by the IRS, the individuals who are 5 percent owners of the company, and those whose work is connected with certain gaming activities.

Reporting the Indian Employment Credit

The Indian Employment Credit has one name is reported diversely for employers with various business structures. Partnerships and S corporations must utilize IRS Form 8845, Indian Employment Credit, to claim the credit. Employers that are estates or trusts report the credit on Form 8845 or IRS Form 3800, General Business Credit, contingent upon whether the source credit comes from a beneficiary. Cooperatives must decide the total tax liability before figuring out where to report the Indian Employment Credit. Different types of businesses report the credit on IRS Form 3800.