N-884: Credit for Employment of Vocational Rehabilitation Referrals (2025)

Who files this form

Use Form N-884 if you hire new employees who are vocational rehabilitation referrals and elect to claim the credit for their qualified first-year wages.

Also use this form to report unused credits carried over from prior years or your share of credits passed through from another entity. Qualifying partnerships and S corporations may pass the credit through to their partners or shareholders.

When it's due

For tax year 2025, all claims for this credit, including amended claims, must be filed on or before the end of the twelfth month following the close of the taxable year for which the credit is claimed.

Missing this deadline waives your right to claim the credit.

What you'll need

• Your name and Social Security number or federal employer identification number, as shown on your return.
• Each employee’s name, approved employment starting date, Social Security number, and qualified first-year wages paid during the year. Attach a schedule if more space is needed.
• Approved employee certification forms. Keep these for audit purposes.
• If claiming a passed-through credit, the applicable Schedule K-1 for Form N-20, N-35, or N-40, or federal Form 1099-PATR or a cooperative statement. You also need the flow-through entity’s name and federal employer identification number.
• Any unused credit carryover amount from prior years, your applicable tax return, and Schedule CR.

How to file

Attach Form N-884 to Form N-11, N-15, N-20, N-30, N-35, N-40, or N-70NP, as applicable.

• List eligible employees and qualified first-year wages, limited to $6,000 per employee. Total the wages on line 2 and multiply by 20% for line 3.
• Add any flow-through credits on line 4. Enter the total new credit on line 5 and Schedule CR, line 25, column (b).
• Form N-20 and N-35 filers report line 5 on their applicable Schedule K and skip lines 6 through 12. Form N-40 filers report beneficiaries’ distributive shares on Schedule K-1 or continue to line 6 for the trust or estate’s share.
• Other filers continue through the carryover and tax-liability calculation. Enter the smaller of line 7 or line 10, rounded to the nearest dollar, on line 11 and Schedule CR, column (c).
• Enter unused credit on line 12. If it is greater than zero, also enter it on Schedule CR, column (d).

The supplied text does not give a mailing address or e-filing directions.

Common mistakes

• Claiming wages above the limit: Qualified first-year wages cannot exceed $6,000 per employee.
• Forgetting the wage-deduction adjustment: Subtract the current-year credit on line 3 from your salaries and wages deduction, even if you must carry some of the credit forward.
• Not keeping certifications: Employers must retain approved employee certification forms for audit purposes.
• Completing lines that do not apply: Form N-20 and N-35 filers must skip lines 6 through 12.
• Missing Schedule CR entries: Report the new credit, applied credit, and any positive unused carryover in the appropriate columns.

Questions people ask

How is the credit calculated?

The credit equals 20% of qualified first-year wages paid during the taxable year. No more than $6,000 of wages per employee may be counted.

Is the credit refundable?

No. It is a nonrefundable credit. Unused credit may be carried forward to offset income tax liability in subsequent years until exhausted.

Can I use this form just to report a carryover?

Yes. Form N-884 is also used to report unused credits carried over from prior years.

Does claiming the credit affect my wage deduction?

Yes. You must reduce your salaries and wages deduction by the current-year credit on line 3, even if you cannot use the full credit this year.

Do I attach employee certification forms?

The form directs employers to retain approved employee certification forms for audit purposes.

Official sources

• https://files.hawaii.gov/tax/forms/current/n884_i.pdf