What is the Work Opportunity Tax Credit program?
The Work Opportunity Tax Credit (WOTC) program is a government program available to provide business owners an incentive for hiring individuals from a few specific target groups that have traditionally faced barriers to employment.
The target groups included in the WOTC program include:
- Temporary Assistance for Needy Families (TANF), also called Qualified IV-A recipient.
- Qualified veteran.
- Qualified ex-felon
- Designated community resident.
- Vocational rehabilitation referral.
- Recipient of SNAP benefits (food stamps).
- Supplemental Security Income (SSI) recipient.
- Long-term family assistance recipient.
- Qualified Long-term unemployment recipient.
Why does it matter to me as an employer or business owner?
Your business may benefit from a one-time tax credit for hiring a member of one of these target groups. By filing, and dependent on a few criteria being met, you can receive between $2,400 and $,9600 for each person you hire. There are no limits placed on the the number of eligible new hires you add to your payroll.
The amount you receive is dependent on a percentage of qualified wages you pay during either the first one or two years that an employee works (this varies dependent on the category). Each new employee must work at least 120 hours for you to qualify for this credit.
I've recently rehired a number of employees. Can this apply to re-hires? What about existing employees?
This program is designed to only be applicable to new hires, and rehires or existing employees do not qualify. To qualify, applicants must respond to the questions either before or on their date of hire.
Do work from home employees qualify for WOTC?
Absolutely. There are no restrictions on where an employee works, only in that they are in one of the defined categories, and are new hires. They can work in your office or worksite, or from home.
Will this impact my employee’s taxes or benefits?
WOTC is a federal tax credit program designed to be used to offset federal income tax liability for the employer. This will not have any direct impact on your employees, only in that you may be more likely to hire them if they qualify. WOTC is designed as a benefit for employers only.
Can Non-Profits benefit from WOTC?
Since WOTC is a tax credit and non-profits do not pay federal income tax, they do not qualify under most circumstances. However, if organizations are exempt from taxation under IRC 501(a) status , they may be able to claim the credit for veterans.
Can I claim WOTC for my 1099 contractors?
Independent contractors are not considered to be employees. As you are not withholding taxes for them, you cannot claim them.
What about Temporary Positions through Staffing Agencies? How about Part Time positions?
It does not matter if a position is temporary. If a staffing agency is paying an employee directly, they can still potentially claim the tax credit. As long as the employee satisfies the minimum number of hours to qualify in a year, it does not matter whether they are full or part time.
If I run my own company, can I claim myself?
No, unfortunately business owners do not qualify for WOTC.
Who administers WOTC?
WOTC was created under the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). It is administered by a joint commission of the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL). However, while this is a federal program, the administration and certification occurs at the state level through State Workforce Agencies (SWA). Because of this, there is likely some variation as to the amount of time that it takes to process applications between different states. Click here to learn more information.
Is WOTC EEOC Compliant?
WOTC is compliant with the provisions of the Equal Opportunity Commission (EEOC). While the questions may seem intrusive to some, they were developed in a way with which the EEOC was comfortable. It is administered with the satisfaction of the IRS, DOL, and EEOC, and is commonly been used by many major employers.
Why is this new to me?
While many large companies are quite familiar with WOTC, many smaller ones have not participated due to the cumbersome process involved with administering it. We have offered this program in our software to make it considerably easier for smaller companies to be able to gain the benefits at a minimal expense.