CLIENT KNOWLEDGE BASE

    Work Opportunity Credit (WOTC)

    The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring and employing individuals from certain targeted groups who have faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

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      Hidden Hiring Tax Credit

      The Work Opportunity Tax Credit is a "hidden" hiring tax credit used to incentivize employers to hire certain groups of individuals. 

      WOTC BASICS

      • Credit ranges from $1,200 to $9,600 per employee hired, depending on the group
      • Employer has 28 days from the employee's start date to file the claim
      • No cap on the amount of credit per year
      • Carryforward up to 20 years

      TARGETED GROUPS

      • Veterans, with various sub-categories
        • Have the highest credit
      • TANF recipients
      • SNAP (food stamp) recipients
      • Designated Rural Community Residents
      • Ex-felons
      • Supplemental Security Income (SSI) recipients
      • Summer Youth Employees (in empowerment zones)
      • Vocational Rehab Referrals
      • Long Term Unemployed individuals (at least 27 consecutive weeks of unemployment) 

      PROCESS & TIMING

      • It is an IRS program, however, it is administered at the State level
      • IRS Form 8850 - Pre-Screening Notice & Certification Request for the Work Opportunity Credit
        • Filled out at the time of the job offer or day of acceptance
        • Completely voluntary on the employee side
        • Requires information from both the employee and employer 
      • ETA Form 9061 - Individual Characteristics Form 
      • Submit both completed forms to STATE workforce agency within 28 days of the employee's start date — STRICT DEADLINE!
      • State will make determination of eligibility
      • New employee must work at least 120 days
      • Cannot be a re-hire or someone who had previously worked for the company
      • Credit is claimed on the business tax return

      RECOMMENDATIONS

      • Integrate this process into your hiring or payroll process
      • Consider adding it at the job offer stage so there is plenty of time to claim the credit
      • Take advantage of the state workforce agency to source qualifying applicants
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