Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a federal tax incentive program that can reduce an employer’s costs by up to $9,600 per new hire. The program is available to employers hiring individuals from specific target groups who face barriers to employment.
For-profit employers hiring individuals in target groups and tax-exempt organizations that hire qualified veterans may benefit from the WOTC. The actual amount of tax credit per employee is based on a percentage of the eligible employee’s wages. There is no limit on the number of eligible employees.
- Qualified veteran
- SNAP (food stamp) recipient
- Temporary Assistance to Needy Families
- Designated community resident
- Summer youth
- Vocational rehabilitation referral
- Supplemental Security Income (SSI) recipient
- Long-Term Unemployed
Process to Claim Tax Credit
GBQ provides the following services to yield maximum benefits while making minimal demands on employers:
- Pre-screen employees – Employees complete IRS Form 8850 and a supplemental questionnaire to determine WOTC eligibility.
- Certify eligible employees – Submit required forms to the respective DLA and provide additional documentation, as necessary, to expedite the issuance of certifications.
- Credit calculation – The tax credit is equal to 25% of wages after 120 hours worked or 40% of wages after 400 hours up to the maximum amount allowed based on the employees’ target group.
- Claim the tax credit – Taxable businesses apply the credit against business income tax liability on their federal tax return. The credit has a carry-back of one year and carry-forward of 20 years.