We all know that hiring is a big expense. Luckily, the government wants to help make the burden of the cost of hiring a little less painful. That is where the Work Opportunity Tax Credit (WOTC) comes in.
The Work Opportunity Tax Credit offers a tax credit to employers who hire employees from certain target groups that have historically faced barriers to employment, including ex-felons, veterans and people on long-term unemployment.
How does the WOTC program work?
Taxable employers and qualified tax-exempt companies who hire someone that is a member of a WOTC target group can apply for a general business credit against their income tax. Before you can claim the credit, you must verify that your new employee meets the qualifications of one of the groups and you must also fill out the IRS Form 8850.
Employees who are considered a "target group" for WOTC
The following groups are considered target groups under the WOTC program:
- Qualified short-term and long-term IV-A recipients (Temporary Assistance for Needy Families)
- Qualified veterans
- Designated community residents (DCR)
- Vocational rehabilitation referrals
- Summer youth employees
- Supplemental Nutrition Assistance Program (SNAP) recipients
- Supplemental Security Income (SSI) recipients
- Qualified long-term unemployment recipients
How much can employers get from WOTC?
Depending on what targeted group an employee is a part of, the Work Opportunity Tax Credit will be subject to different qualified wage maximums. The credit you can claim will be either 25% or 40% of the qualified wages. If an employee works at least 400 hours during their first year of employment, you can claim 40% of allowable qualified wages. In the end, you can save up to $9,600 per hire.
Claiming the WOTC
To put it simply (lol) it's a 6-step process. However, when you choose a HCM software like Symply, we do the leg work for you and will alert you if an employee is eligible, saving you hours of research and work. Get in touch today to learn more about Symply.