Work Opportunity Tax Credits are federal credits distributed at the state level. Businesses are entitled to claim tax credits for hiring individuals who are members of certain targeted groups. The amount of the credit ranges from $2,400 to $9,600 depending on which group the individual belongs to. The legislative authority for the WOTC program, which had expired on December 31, 2014, has been extended through December 31, 2019, including 2015 retroactively. With this extension, a newly created category of qualified hire has been included for long-term unemployed (27 consecutive weeks or longer).
Eligible groups include:
- Members of families that receive Supplemental Nutrition Assistance Program benefits (food stamps)
- Members of families that receive Temporary Assistance for Needy Families (TANF) or Aid to Families with Dependent Children (welfare)
- Individuals receiving Supplemental Security Income (SSI)
- Qualified disabled or unemployed veterans
- Qualified ex-felons
- Individuals who have completed or are completing a vocational rehabilitation program
- Qualified “summer youth” ages 16 or 17 living in an empowerment zone
- Residents of designated communities, including individuals living within an empowerment zone
- Long-term unemployed (27 consecutive weeks or longer)
Companies must apply for WOTCs within 28 days of a new hire’s start date. As a result, the ongoing management, monitoring, and optimization of your company’s WOTC program is essential. These credits apply retroactively for the entire 2015 tax year. (The IRS has also extended the 28-day application requirement so businesses can take advantage of the whole year’s hiring activities).
If your company does not have an ongoing WOTC program, it is a good time to think about implementing one. This can be very important as establishing an ongoing WOTC program enables companies to get the compliance issues addressed as a part of the new-hire onboarding process.
LBMC offers comprehensive WOTC services, including a web-based tool for managing your company’s WOTC program. Our nationwide WOTC solutions help your business identify eligible employees, ensure federal and state compliance, provide detailed reporting, and maximize the cost savings to your business.