WORK OPPORTUNITY TAX CREDIT (WOTC)

WOTC provides tax credits to employers who hire individuals from certain select, qualified pools of candidates. Our services allow you to document eligibility and then track hours worked and payroll records to provide a sustainable recap for the credit on an on-going basis. As with all specialty tax services, certain requirements must be met so a clear understanding of eligibility and the claims process are essential.

Eligibility

The WOTC provides employer tax credits for hiring qualified candidates from certain target groups. Specific documentation is required both to confirm employee eligibility and to track weekly hours worked and payroll records. A qualified claim can provide $2,400 in credits in most cases and up to $9,600 in others.

The tax credit can range from 25% to 40% of the wages earned by a new employee in their first year depending upon which target group the employee belongs to. If an employee works at least 120 hours the credit for the employer is 25%. If the employee works at least 400 hours, the credit will reach 40%.

Key factors in determining the availability and amount of the credit include the target group that the employee is a part of, the rate they are paid in their first year of employment and the total hours they worked.

Per IRS regulations, hiring qualified individuals from these target groups may provide credit opportunities:

  • Veterans in various categories
  • TANF Recipients
  • Recipients of Aid to Families with Dependent Children (AFDC)
  • NAP (Food Stamp) Recipients ages 18-39
  • Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
  • Vocational Rehabilitation Referral
  • Ex-felons
  • Supplemental Security Income Recipients
  • Summer youth employees, ages 16-17 (living in Empowerment Zones)

For the long-term Temporary Assistance for Needy Families (TANF) target group only, the credit is available to employers who hire members of this group for up to a two-year period.

  • In the first year, the employer may claim a tax credit equal to 40% of the first-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
  • In the second year, the employer may claim a tax credit equal to 50% of the second-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
  • FAQ

    What type of employee candidates quality?
    • Veterans in various categories
    • TANF Recipients
    • Recipients of Aid to Families with Dependent Children (AFDC)
    • SNAP (Food Stamp) Recipients ages 18-39
    • Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
    • Vocational Rehabilitation Referral
    • Ex-felons
    • Supplemental Security Income Recipients
    • Summer youth employees, ages 16-17 (living in Empowerment Zones)
    What are the potential savings? (Have these amounts changed?)

    A qualified claim can provide $2,400 in credits in most cases and up to $9,600 in others.

    Are the credits permanent?

    The tax credit is available for the first year that an employee works. For the long-term Temporary Assistance for Needy Families (TANF) target group only, the credit is available to employers who hire members of this group for up to a two-year period.