If you’re not taking full advantage of the Work Opportunity Tax Credit (WOTC) for your business, you could be leaving money on the table. You may be asking, “Does WOTC apply to my business?”
- “I am not sure who would be eligible, or what exactly a target group means”
- “It’s probably not that much of a credit, so why bother with the hassle”
- “I don’t hire WOTC eligible people, so this is irrelevant”
- “The WOTC process sounds like a lot of work. I’m just too busy”
Do these statements sound like you? Although these are valid concerns, they are unfounded. The information and tools to make WOTC screening and processing easy as pie are literally at your fingertips.
Let’s tackle these concerns one at a time.
“I am not sure who would be eligible, or what exactly a target group means”
WOTC is designed for certain target groups that experience significant barriers to employment. Those groups include:
- Veterans, including disabled veterans
- Individuals participating in government assistance programs such as
- Temporary Assistance for Needy Families (TANF)
- Supplemental Nutrition Assistance Program (SNAP) / Food Stamps
- Individuals residing in Empowerment Zones or Rural Renewal Counties, which are economically distressed urban or rural communities
- Vocational rehabilitation referral
- Ex-felons
- Supplemental security income recipients
- Qualified long-term unemployment recipients (long term is defined as 27+ weeks of unemployment assistance)
It’s not always obvious that you are speaking with someone who fits one or more of these categories. Including specific screening questions as outlined on Form 8850 and Form 9061 during the onboarding process will help you identify individuals who could qualify for the tax credit. To make this process even easier, you should consider an automated onboarding and screening process to screen all new employees and ensure compliance with all new hire paperwork.
“It’s probably not that much of a credit, so why bother with the hassle”
In fact, tax credits can be as much as $9600 per eligible employee! That can add up quickly. The maximum credit amount depends on the target group category the employee falls into, as well as the number of hours he or she works during the first year of employment. Employees must work at least 120 hours to be eligible for a tax credit of 25% of the employee’s first-year wages, up to $6,000, depending on the applicable target group. If the employee works at least 400 hours, the eligible tax credit percentage increases to 40% of the first-year wages, up to $9,600, depending on the applicable target group.
“I don’t hire WOTC eligible people, so this is irrelevant”
Let’s take a look at a couple of the target groups for WOTC to get a better picture into how many people could potentially be eligible for this tax credit.
- Veterans: According to the American Community Survey, published by the U.S. Census Bureau, 19.5 million civilians reported as veterans of the U.S. military.
- TANF Recipients: According to the Federal Safety Net, “TANF averaged 1.4 million families in 2017.” This represents 900,000 adults and 2.5 million children.
- SNAP Recipients: According to the Federal Safety Net, more than 40 million people participated in SNAP in 2016, of which 56% are adults.
These are just 3 of the target groups and already we see the significant population that could be eligible for WOTC. Chances are good that you could have applicants in one of these target groups enter your workforce on any given day. That makes screening all the more critical to ensure you maximize your available tax credits.
“The WOTC process sounds like a lot of work. I’m just too busy”
It doesn’t have to be. With an automated solution like Efficient Hire, your company can screen 100% of your new employees during the onboarding process. Our onboarding solution comes equipped with an interactive Q&A that walks your new employees through a series of questions to identify eligible candidates for the tax credit and complete the necessary 8850 and 9061 forms required for WOTC claims. Then, with our WOTC Processing solution, we automatically take those claim applications and route them to the appropriate state for review and approval. The whole process is seamless and streamlined
Efficient Hire takes the work out of WOTC so you can rest easy knowing you are going after the maximum number of incentives.
Disclaimer: Efficient Hire does not offer legal or tax advice. The information contained in this article is intended for educational purposes only.