Did you know that $1 billion is claimed every year in tax credit under the Work Opportunity Tax Credit (WOTC) program? The COVID-19 pandemic has brought unprecedented changes for small and large business owners across the globe. Luckily, the WOTC can help you save money and optimize your revenue. Here’s everything you need to know:
What Is the Work Opportunity Tax Credit (WOTC)?
This federal tax credit is available to employers who hire individuals from certain targeted groups. It’s a way to help employees gain a steady income and employers by reducing their income tax liability and lowering their cost of doing business. The tax credit encourages diversity and job accessibility to different areas of the workforce. This tax credit depends on the following factors:
- The category of employees
- The wages paid the employees
- The total numbers of hours worked
Who Qualifies For WOTC?
If you decide to hire under the WOTC, you’ll need to ensure that the employee qualifies for the program itself. The IRS has listed some eligible targeted groups:
- People who get temporary assistance for needy families (TANF)
- SNAP Recipients
- Ex-felons
- Qualified veterans
- Supplemental Security Income (SSI)recipients
- Summer Youth Employees
- Qualified Long-Term Unemployment Recipients2
- Designated Community Residents
- Long-Term Family Assistance Recipients
- Vocational Rehabilitation Referral
Who’s Not Eligible?
You won’t receive a tax credit if you hire your family members or dependents such as your spouse, children, parents, siblings, nieces, nephews, uncles, aunts, and even in-laws. Another factor to remember is that you can’t hire an individual who is a majority owner of your business for a tax credit.
How to Qualify The Worker?
To qualify the worker, you’ll have to fill in some forms. The applicant will be first be required to complete the IRS form 8850; this is a pre-screening form. After the job offer has been made, the applicant must fill Department of Labor form 9601, verified by the employer. Once both forms are filled, send them to the state workforce agency, who will then decide whether the work is eligible and WOTC credit applicable.
Are you looking to learn more about WOTC? We’ve got you covered! Our experts offer top-notch tax credit services that will help you maximize your claims. We have the latest software and reporting dashboard, which makes identification and management easy. We also offer cost segregation services. For a free consultation, call us today at (775)-298-4122.