By: Katherine Muniz Jan 04, 2016

NYC Now Offering a Minimum Wage Reimbursement Tax Credit to Eligible Employers

New York students between the ages of 16-19 just got a foot in the door career-wise, thanks to New York State’s new law which offers employers a tax credit for employing student workers at the minimum wage rate. Under New York State Tax Law (Article 1, Section 38), New York State employers who employ students between the ages of 16-19 at the minimum wage rate, are entitled to receive a tax credit per hour worked.

Who is Eligible?

Employers Eligible Student Employee Requirements
Corporations
  • Employed by an eligible employer in New York State
Sole Proprietors
  • Receiving the minimum wage rate of pay
Limited liability companies
  • Between the ages of 16-19 when receiving the minimum wage rate
Partnerships
  • A student when receiving the minimum wage rate

This credit applies to eligible employers that began hire of a student worker at minimum wage between January 1, 2014 and January 1, 2019. Regarding the retroactive pay all the way back to January 2014, it’s possible that the tax writing was just finished for the law, which could be due to the drafting of the new minimum wage increase law for New York.

Update: Effective December 31, 2015, New York’s minimum wage has increased to $9. See below for a full list of wage increases occurring across the U.S. for 2016.

How does it work?

For each eligible student employee who is paid at the minimum wage rate of pay, employers are entitled to a tax credit per hour worked to reduce the employer’s burden. The credit is equal to the total # of hours worked by eligible employee during the taxable year for which they are paid the NY minimum wage, multiplied by the applicable tax credit rate for that year, as follows:

Tax years Tax credit rate
Tax years beginning on or after January 1, 2014, and before January 1, 2015 $0.75
Tax years beginning on or after January 1, 2015, and before January 1, 2016 $1.31
Tax years beginning on or after January 1, 2016, and before January 1, 2019 $1.35

In order to qualify, employers must also obtain documentation to verify that the employee is currently enrolled as a student at an eligible educational institution. Additionally, employers are prohibited to terminate one employee and hire another for the sole purpose of qualifying for this tax credit. For more information on this new tax credit, see this Minimum Wage Reimbursement Credit Fact Sheet, or the Department of Taxation and Finance of the State of New York outline.

State Minimum Wage Hikes in 2016

While the federal minimum wage is currently $7.25 per hour, employees are entitled to a higher rate of pay if their state minimum wage is higher than the federal wage. Here are the state minimum wage increases that have taken effect during December 31, 2015 – January 1, 2016: New York: $9.00 per hour

  • New York will increase the state minimum wage from $8.75 to $9 effective December 31, 2015.
  • New York will also increased tipped employees to receive  minimum wage of $7.50 per hour. Previously, food service employee received a minimum wage of $5, service employees received a minimum wage of $5,65, and service employees in rest hotels received a minimum rate of $4.90. All classes of tipped employees have now been consolidated into one class.
  • New York will increase the hourly minimum wage for fast food workers to $9.75

Alaska: $9.75 per hour

Arkansas: $8.00 per hour

California: $10.00 per hour

Colorado: $8.31 per hour

Connecticut: $9.60 per hour

Hawaii: $8.50 per hour

Massachusetts: $10.00 per hour

Michigan: $8.50 per hour

Nebraska: $9.00 per hour

Rhode Island: $9.60 per hour

South Dakota: $8.55 per hour

Vermont: $9.60 per hour

West Virginia: $8.75 per hour

With fourteen states having increased their minimum wage at the start of the year, thousands of workers have kicked off 2016 with increased pay. Adjusting employee rates can be done quickly using FingerCheck, making complying with your state’s increased minimum wage a breeze. [Photo credit: Lendingmemo]

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Category: Compliance | HR

Katherine is a New York-based digital writer who joined Fingercheck in 2015. She promotes Fingercheck through the power of the written word. She graduated from Fordham University with a B.A. in Communications and Media Studies with a focus on Journalism. Connect with her on LinkedIn

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