Work Opportunity Tax Credits (WOTC)

What is the Work Opportunity Tax Credit (WOTC)?

WOTC is a federally mandated program administered by each state that offers tax credits in order to encourage employers to hire from targeted groups. There are 10 different eligibility types with credits that are valued from $1,200 up to $9,600 per new hire. Whether you are adding staff due to business growth or you regularly have new hires, these tax credits can add up to a considerable advantage for your bottom line. The key to maximizing these credits is to have a simple, effective screening process in place to identify qualified WOTC new hires and ensure that claims are reported in a timely manner.

WOTC Eligibility Requirements

As a private, for-profit employer, you may receive credits against your federal tax liability for eligible employees. Numerous variables determine the credit per employee, and compliance requirements include the timely filing of claims, typically within 28 days of hire.

Available Credits

The credits are calculated for each new hire and prorated based on hours worked and percentage of wages paid. Both full- and part-time employees can qualify, and there is no limit to the number of eligible employees claimed per year. Current maximum allowable credits per new employee are:

  • $1,200 — summer youth.
  • $2,400 — qualified adult hire.
  • $5,600 — unemployed veteran hire.
  • $9,000 — long-term family assistance recipient hire (over two-year period).
  • $9,600 — disabled veteran hire.

Targeted groups

Employers may file claims for employees who have worked a minimum of 120 hours and meet one of the following target criteria:

  • Long-term family assistance recipient.
  • Qualified recipient of Temporary Assistance for Needy Families (TANF).
  • Qualified veteran.
  • Qualified ex-felon.
  • Designated community resident (i.e., federal empowerment zones (EZ) and rural renewal counties (RRC)).
  • Supplemental Nutrition Assistance Program (SNAP) recipient.
  • Supplemental Security Income (SSI) recipient.
  • Vocational rehabilitation referral.
  • Summer youth employee.
  • Individual displaced by Hurricane Katrina.

WOTC Screening

WOTC filing rules require employers to screen and certify eligible employees before filing up to three forms per employee claim. Often sensitive in nature, the qualifying criteria for WOTC must be handled carefully in order to comply with the guidelines and enable employee-employer relationships. The WOTC screening program can help you incorporate the required screening into your regular hiring process to make sure you do not miss an opportunity.

Real Experience Makes a Difference for You

The credits and incentives team includes individuals with federal, state and employment tax experience who will help you:

  • Identify eligible claims.
  • Help document eligibility.
  • File timely claims.

Although WOTC is a nationally available federal credit, it is administered at the state level. If you are operating in multiple states, your tax and hiring resources may need to comply with differing requirements, deadlines, and submission criteria. You may be eligible for additional state-specific credits that can be identified through data obtained through the WOTC screening program.

The WOTC program offers a real solution for businesses looking for an efficient, effective and confidential process to ensure that your business is taking full advantage of the credits that are available to you. For more information on whether this program may be right for you, please contact us.

WOTC Example Savings:

Company Size: 300 employees
Number of Annual New Hires: 100
Qualifying Percentage: 15%
Average Tax Credit: $2,400.00
Employer Credit: $36,000.00

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