With the utilization rate of less than five percent, business owners are leaving a ton of money unclaimed for this tax credit.
What is 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. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit.
The Work Opportunity Tax Credit was begun in 1996 to encourage employers to hire and retain veterans and individuals from other target groups.
The credit was scheduled to be eliminated for 2015, but the PATH Act of December 2015 reinstated the tax credit and extended it through December 31, 2019.
How Does the Work Opportunity Tax Credit Work?
The Work Opportunity Tax Credit (WOTC) is not one but several tax credits given to employers for hiring certain individuals who meet specific criteria. The amount of tax credit you can claim depends on several factors:
- The targeted group the newly hired employee belongs to
- The wages paid to that individual in the first year of employment, and
- The number of hours worked during that first year.
All categories of WOTC credits have a maximum credit available. The maximum amount of the
WOTC varies by the individual hired:
- $ 2,400 for each new adult hire;
- $ 1,200 for each new summer youth hire;
- $ 4,800 for each new disabled veteran hire;
- $ 9,000 for each new long-term family assistance recipient hired over a two- year period.
The new employee hired must be in one of nine target group and must be qualified by the State unemployment agency before being hired.
The groups are as follows:
- Long term Temporary Assistance for Needy Families (TANF) recipient;
- SNAP (Food Stamp ) Recipients;
- Designated community residents (DCR) who live within Empowerment Zones or Rural Renewal Counties;
- Summer youth employee;
- Vocational rehabilitation referral;
- Ex-felons (hired within one year after conviction or release from prison);
- Supplemental Security Income (SSI) recipient;
Certain Americans, such as veterans, food stamp recipients and teenagers on summer break from school, face steep odds in obtaining employment. But with the extension of the Work Opportunity Tax Credit (WOTC) through December 31, 2019, businesses will receive an ongoing tax incentive to hire them.
The U.S. Department of Labor (DOL) notes the WOTC income tax credit for employers benefits all who participate and helps boost the nation’s economic growth and productivity. The WOTC:
- Reduces an employer’s cost of doing business;
- Requires little paperwork;
- Can reduce an employer’s federal income tax liability by as much as $ 9,600 per employee hired;
- Does not limit the number of individuals a business can hire to qualify for the tax credit;
- Allows certain tax-exempt organizations to hire eligible veterans and receive a credit against the employer’s share of Social Security taxes.
The success and growth of this income tax credit for business is beneficial for all who participate, while increasing America’s economic growth and productivity.
Now let’s look at some reasons why this is not happening to today’s business owners:
- Business owners are not aware of the tax credit for hiring certain classes of individuals.
- Their current tax planner has not advised the business owner that he may qualify for the Work Opportunity Tax Credit.
- The Tax Planner advises the business owner the filing process is too complicated and it isn’t worth the time involved in doing the paperwork.
- Mistakes are made by filing the paperwork after the prospective employee has been hired.
- Mistakes are made in not filing the required paperwork in the 28 days as required by law.
With business owners only utilizing this credit at a rate of less than 5%, what is the solution for the business owner to use?
Let me introduce you to the first automated software to process and obtain the WOTC Tax Credit with the following procedures:
- Manager enters new Candidate into the system.
- Candidate automatically receives an email requesting they complete the survey. This process promotes truthful answers from the candidate.
- Software verifies the candidate’s information and if the candidate’s information is incorrect, the software encourages the Candidate to correct the information.
- Once the information is corrected, the software prepares all the applicable forms and submits them to the proper state agencies to get certified.
- Once the candidate is certified, the WOTC credits are authorized and now the candidate can be officially hired.
- The whole process is completed before the 28th day as required by law.
Visit this link to see how much of a WOTC credit you may qualify for: https://gmg.me/104990.
Author: Ken May