The Workers Opportunity Tax Credit [WOTC] applies if you hire specific
types of employee. Credits run from $1,200 to $9,600 depending on the
individual. The average is $2,400.
A taxable business may apply the credit against its business income tax
liability, and the normal carry-back and carry-forward rules apply. For
qualified tax-exempt organizations, the credit is limited to the amount of
employer social security tax owed on wages paid to all employees for
the period the credit is claimed.
To take full advantage of the credit, you have to determine if an applicant
is eligible before you hire her/him. This requires five to seven distinct
steps that end with your hiring the individual and filing for the credit in a
timely manner.
The complexity of the process along with the likelihood that the applicant will
be less than truthful (required questions are very personal) has led to the
credit being collected by less than .03% of all employers, limited mostly to
those hiring 1,000 employees a year. ERs often take as long as ten days to
discover whether the interviewee is tax-credit eligible, delaying the hiring
process.
Our affiliate has developed a subscription system to allow even those employers
who hire only ONE new employee a year, to benefit. Of course, not all ERs
are prospects.
Using proprietary software, an ER can pre-screen each applicant by having
it ask for the pertinent information separately from the ER with an
assurance that details will not be disclosed to the ER, along with clear warnings
about perjury. The answers are then immediately compared with a national
database for accuracy and completeness. If a discrepancy appears, the
interviewee will be given an opportunity to “clarify” the error (which it
may be). When tallied, the eligibility (or not) for a tax credit is disclosed.
The ER can then compare candidates and decide if the credit is a sufficient
incentive. At an average $2,400, it usually is.
Once the new EE is hired, the program will file for the Credit with the State.
Everything is done electronically. No paperwork is involved so there are no
handwriting issues or other delays. Missing the State deadline results in
losing the Credit.
Subscription to the software is based on estimated annual hires: from
$19/month – up to 9 hires, all the way to $399/month for those hiring up
to 200/year. Higher usage is negotiable. Our affiliate’s fee is 15% of
the tax credit.
The criteria for WOTC covers a large range. Primary recipients:
- Veterans
- TANF Recipients
- SNAP (Food Stamp) Recipients
- Designated Community Residents (living in Empowerment Zones* or
Rural Renewal Counties*) - Vocational Rehabilitation Referral
- Ex-felons
- Long-term Unemployed
- Supplemental Security Income Recipients
- Summer Youth Employees (living in Empowerment Zones)*
Employers generally earn a tax credit equal to 25% or 40% of a new
hire'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.
Circa 10–15% of new employees qualify for WOTC annually. The only way
to know is by processing a new applicant. To see how the tax-credit portal
can work for you, go to: https://gmg.me/186344
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* EZs are primarily in cities. Rural Renewal Counties are those that
suffered major population reductions in recent years, mostly in the
Rust Belt.