Some employers are not aware of the Worker Opportunity Tax Credit (WOTC) program, and that they could be receiving a significant amount of tax credits every year. If you’re unfamiliar with this incentive opportunity, WOTC offers tax credits for employers who hire and retain individuals of certain target groups that face significant barriers in obtaining employment. This federally funded incentive has been rewarding businesses in the form of tax credits since 1996, and has been granted many extensions past expiration dates for its positive impact on businesses and U.S. citizens. The program has morphed throughout its existence to help specified target groups with an identified statistical disadvantage in finding work opportunities. U.S. employers can potentially earn tax credits from $1,200 up to $9,600 per qualified new employee by simply incorporating a questionnaire during the application process and submitting documentation within regulated deadlines. Because of its frequent changes through legislation, it can be challenging for staffing professionals to keep up with how to track eligible new employees for claiming these tax credits. Below are some frequently asked questions regarding WOTC based on the latest 2016 extension to continue the WOTC program until December 31, 2019.
Is WOTC a requirement among businesses and new employees?
The WOTC program is voluntary for businesses to take advantage of. Candidates and new employees can opt-out of identifying themselves as part of the target groups during the application process if they prefer not to disclose that information.
Can staffing and recruitment agencies participate in WOTC?
As long as your company is considered the “common-law” employer, eligibility status for tax credits should be achieved. However, it is best to consult with your company’s tax professional to ensure your business model meets all the necessary requirements.
- Does our company have to manage WOTC ourselves?
With the strict application deadlines and required paperwork, WOTC administration can be a difficult task for busy staffing professionals to keep up with. Luckily, third-party WOTC management companies like our partner MAXIMUS, electronically track candidate eligibility and submits documentation on your behalf, to ensure all regulations are met correctly to obtain earned credits.
Who is eligible for WOTC?
Only new-hires are eligible to be submitted for tax credits if they fall within the specified target groups. This excludes current or rehired employees. The chosen target groups are selected based on difficulty for specific demographics to obtain employment. Some of the most common groups that employers claim tax credit for include:
- Military Veterans
- Individuals that have been unemployed for 27 consecutive months
- Temporary Assistance for Needy Families (TANF) recipients
- High-risk youth
- Qualified summer youth residing in an empowerment zone
- Food stamp recipients
- Supplemental Security Income recipients
- Vocational rehabilitation referrals
The benefits that WOTC provides private sector businesses are definitely worth taking advantage of. With the cost savings your staffing agency could potentially earn through tax credits, be sure to confirm your company is eligible to participate. Through our partner MAXIMUS, we provide an integrated WOTC solution with our Adapt Onboarding solution to eliminate the added administrative burdens and disruptions in business activities. To learn more about how our staffing technology products can help drive your company toward operational excellence and efficiency, schedule a demo today!