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Hire Purpose Bringing disadvantaged employees aboard has never been so rewarding--and we're not just talking about the tax credits you'll get.

By Joan Szabo

Opinions expressed by Entrepreneur contributors are their own.

If you're thinking about adding staff, don't neglect thetax consequences of your plans. Two tax credit opportunities, forexample, could provide some important savings and help defray thecosts of keeping an employee on your payroll. These credits wereextended through 2003 by the Job Creation and Worker Assistance Actof 2002.

The first type of tax opportunity is the work opportunitycredit. It lets employers claim a credit equal to 40 percent of thefirst $6,000 of qualified wages, or a maximum of $2,400, during anemployee's first year of employment. This applies to employeeswho work at least 400 hours during the year and belong to certaindisadvantaged groups, such as qualified summer youth employees,families receiving food stamps, qualified veterans and personsreceiving certain Supplemental Security Income benefits. (For acomplete list, go to www.irs.gov and type "work opportunitycredit" in the search bar.) If the employee works less than400 hours, but at least 120 hours, the credit is reduced to 25percent of qualified wages. (No credit is available for employeesworking less than 120 hours in the year.)

The other is the welfare-to-work credit, which is available toemployers who hire qualified long-term family assistance recipientswho begin work on or before December 31, 2003. It is more generousthan the work opportunity credit and, as a result, it's usuallymore beneficial to claim. The credit is equal to 35 percent of upto $10,000 of wages in the first year and up to 50 percent of up to$10,000 in the second year of employment, for a two-year maximumcredit of $8,500 per employee.

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