WOTC Explained

Taking Advantage of Work Opportunity Tax Credits

This article originally appeared on kwantek.com.

For high-turnover industries focused on hiring hourly employees, it’s common to hire employees that would qualify for Work Opportunity Tax Credits (WOTC). For companies with significant annual hiring volume, using these credits can help deduct tens of thousands of dollars from taxable income. Given this, let’s dive in to how to maximize WOTC for your business.

What is the Work Opportunity Tax Credit?

WOTC is a Federal Tax Credit available to most employers who hire and retain veterans and individuals from other groups with barriers to employment. Employers are eligible to reduce their federal income tax liability by an average of $1,000 per employee, with a credit potential up to $9,600 for some employees.

Who is Eligible for WOTC?

WOTC is available for employers that hire veterans and individuals from other groups with barriers to employment. This includes:

  • Veterans: unemployed and other qualified
  • Temporary Assistance for Needy Families (TANF) recipients
  • Supplemental Nutrition Assistance Program (SNAP) recipients
  • Ex-Felons
  • Supplemental Security Income (SSI) recipients

WOTC Credit Amounts by Target Group

The tax credit you can claim depends on a combination of:

  • Target group of the individual hired
  • Wages paid in the first year of employment (or second year, in the case of TANF)
  • Number of hours worked: eligible employees must work a minimum of 120 hours for an employer to benefit from the credit

WOTC Table

WOTC Table

How Do I Obtain My WOTC Credits?

To benefit from this tax incentive, applications for each WOTC-eligible employee must be submitted to the state in which they work for review and approval. There are two IRS forms you must complete for each hire:

IRS Form 8850 must be submitted within 28 calendar days of the employee’s start date. In addition to completing these forms, you may need to provide supporting documents to prove the employee’s eligibility. Once the employee is approved by the state, you can start gaining credits based on their hours and wages. Keep in mind WOTC is a credit applied to your federal taxable income, and you must file for the tax credit with the IRS.

Through TEAM and Kwantek’s strategic partnership, we are able to offer our mutual clients a combination of data solutions and filing services,to simplify the WOTC process. This helps you avoid drowning in paperwork and can help you deduct thousands of dollars of taxable income.

If you you’re interested in learning more about how your business can take advantage of WOTC*:

  • Contact your account manager if you’re a TEAM customer
  • Contact Kwantek directly if you’re a Kwantek + TEAM customer

*Additional services and fees may apply.

For more information, visit the United States Department of Labor WOTC page.