You may know that there are tax credits available for hiring certain types of employees. However, you may not realize the level of value these incentives can bring to your company. What is WOTC? What is WOTC screening? How much can it impact my business? Is it worth the effort?
What Is the WOTC Program
Since 1996, the federal government has used the Work Opportunity Tax Credit program to reduce the federal tax liability of employers who hire individuals from groups that often face significant barriers to employment. WOTC is not only intended to incentivize employers but provides considerable benefits to your community –
- It provides veterans a smoother transition back into the workforce after serving in the armed forces or helps them find work after experiencing a service-related disability.
- WOTC helps families living at or near the poverty level become more self-sufficient and less reliant on government aid programs such as TANF or SNAP.
- It gives at-risk youth in distressed communities a chance for a better future with a good job.
- WOTC assists people who have a previous felony conviction with a good job, so they don’t go back to a life of crime.
How Big Are these Incentives?
Tax credits are available for both part-time and full-time new hires and are calculated based on a percentage of the wages earned and hours worked. As of 2020, the maximum tax credit per new Hire was $9,600. This highest level of incentive would apply to hiring a disabled veteran who had been out of work for at least six months out of the one year before the date of Hire.
At the low end of the scale, a WOTC-certified new hire working at least 120 hours in the year could qualify you, as the employer, to claim 25% of the first year’s wages for a tax credit of as much as $1,500. That’s a lot of money compared to the short amount of time it takes to screen new hires. With Efficient Hire, it takes nearly zero effort!
How Do Employers Miss Out—and What Can They Do Differently?
There is no limit to the amount of WOTC credits you can claim. But you must screen and new hires correctly! Otherwise, you risk losing out on thousands of dollars in tax savings each year. Many employers make two mistakes in this area. They fail to screen job candidates and/or new hires to see whether they meet the certification criteria. Or, they fail to follow up in a timely manner to meet the 28-day filing deadline. Stop overpaying your taxes each year! Screen all new hires to see if they qualify in any of the WOTC target groups.
On top of optimizing your WOTC program, if you want to maximize these tax credits fully, you may wish to reach out to local organizations and agencies that specialize in helping eligible individuals find work. These agencies can help increase the number of WOTC-qualified candidates that you are interviewing. Start by following these ideas.
- Connect with the state workforce agency to express an interest in hiring WOTC-qualified individuals.
- Post open positions on the Veteran’s Employment Center website and veteran-focused job fairs.
- Work with community leaders who are focused on helping at-risk youth and underprivileged families.
- Reach out to organizations that work with ex-offenders. These organizations keep a list of employers who are open to hiring job candidates who need a second chance.
A Successful WOTC Program
To have a successful WOTC program, the forms 8850 and 9061 should always be a part of the onboarding process. These forms screen all qualified new hires and capture all available credits. They are very cumbersome to complete manually, so many employers just don’t bother. Efficient Hire has been automating WOTC screening and processing for thousands of employers like you for over a decade – we can help you optimize your WOTC program and maximize your tax credits!
So, contact our sales team today to learn more about WOTC and how it can really affect your bottom line.