An Employers Work Opportunity Tax Credit (WOTC) Guide - Workology

An Employers Work Opportunity Tax Credit (WOTC) Guide Amount of Employer  WOTC Tax Benefit The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. Employers claim about $1 billion in tax credits each year under the WOTC program. Companies normally ask candidates during the job offer to complete a Form 8850 which determines if an employer has hired an employee who might be eligible for a WOTC. The second page of the 8850 is completed on the employees date of hire. An ETA Form 9061 or 9062 must also be completed by the employer. The forms need to be completed, signed, and submitted to the IRS and to your state workforce agency within 28 calendar days of the employees start date.  The DOL has an instructional guide that supplements the 8850 forms I normally suggest that employers read. Amount of Employer  WOTC Tax Benefit Employers can receive a tax credit normally between $2,400 t0 $9,600 for each employee who meets the WOTC requirements that are hired. The credit amount depends on the number of hours worked as well as the type of assistance benefits and length of benefits the individual received. Most applicant tracking systems have this baked into their existing hiring process. Companies will need to activate as it requires employers to ask specific questions that trigger eligibility. As a reminder, paperwork must be submitted to the IRS and ETA within 28 calendar days of the new employees date of hire. More About the Work Opportunity Tax Credit Under the Work Opportunity Tax Credit, employers can hire eligible employees from the following target groups and receive a tax credit Unemployed Veterans (including disabled veterans) Temporary Assistance for Needy Families (TANF) Recipients Food Stamp (SNAP) Recipients Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties) Vocational Rehabilitation Referred Individuals Ex-Felons Supplemental Security Income Recipients Summer Youth Employees (living in Empowerment Zones) The tax credit itself is equal to 25% or 40% of a new employee’s first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. The  DOL has a handy  WOTC Calculator  to see how much your business can earn in tax credits which would be extremely helpful if employers were able to submit 8850 documents for the WOTC credits for any hires made in the calendar year. WOTC Resources DOL WOTC Resource Employer IRS 8850 Form   Employer ETA 9061 Form (or ETA 9062) More About the WOTC  (includes legislation) VOTC Resources (Veterans Opportunity Tax Credit)