Navigating WOTC Benefits This Hiring Season
According to Forbes, “multiple sources from the U.S. Bureau of Labor Statistics to hiring companies like Indeed and Monster, [report that] January and February boast the largest numbers of open jobs.”
If your organization is on the hunt for talent, there’s a federal tax credit your business may qualify for if it hires talent from specific target groups.
Which Candidates Qualify Employers for the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit (WOTC) is a federal general business tax credit that encourages employers to hire individuals from certain groups who have historically faced significant barriers to employment. The tax credits, worth up to $9,600 per new hire, can significantly impact an employer’s bottom line.
According to Page Wiseman, SPHR, PHR, and Chief Operations Officer of HRlogics WOTC, “The Work Opportunity Tax Credit program provides a continual foundation for corporations to establish a comprehensive tax credit portfolio to include additional state credits and maximize incentives driving increased profitability.”
"The WOTC credit encourages you and your organization’s HR team to think outside of traditional hiring practices and look to specific groups to help improve their chances of employment," Wiseman adds. "A job is a financial lifeline; it gives someone the chance to change the trajectory of their life."
Businesses may be wondering which candidates qualify and the amount of tax credits they can receive. Below is a breakdown of eligible WOTC target groups and their credit caps:
Veteran Target Groups (Maximum Credit Values)
$9,600 - Veterans with a service-connected disability who have been unemployed for at least 6 months in the past year
$4,800 - Veterans with a service-connected disability and hired within 1 year of their discharge/release date
$5,600 - Veterans who have been unemployed for at least 6 months
$2,400 - Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits
$2,400 - Veterans who have been unemployed for at least 4 weeks but less than 6 months
Non-Veteran Target Groups (Maximum Credit Values)
$9,000 - Long-Term Family Assistance recipients who are members of a family that has received TANF benefits for at least 18 consecutive months
$2,400 - Temporary Assistance for Needy Families (TANF) recipients
$2,400 - SNAP recipients
$2,400 - Long-term unemployed
$2,400 - Supplemental Security Income recipients
$2,400 - Vocational rehabilitation referrals
$2,400 - Ex-felons
$2,400 - Designated community residents
$1,200 - Summer Youth program participants who are 16 to 17 years old, work between May 1 and September 15, and live in a designated community area
In a world of job hopping, choosing to invest in a candidate in a WOTC category could be advantageous in more than just the credit amount: these workers are more engaged, grateful for the opportunity, and more likely to stay on a job longer.
Several studies indicate that the WOTC program has led to favorable employment outcomes for targeted disadvantaged groups, with one study suggesting an approximately 12.6 percentage point increase in employment rates among eligible groups.
Examining qualified veterans, one study revealed that the WOTC incentive raised veteran employment rates by 1.8 percentage points and their wage income by 39.9%. In another study from Wisconsin, the WOTC program was associated with a 5.9 percentage point increase in veteran employment rates and approximately a 9% increase in wages.
Increased participation rates in the WOTC program could significantly amplify its impact on the employment outcomes of these targeted groups.
When Should I Apply for WOTC Credit?
According to the United States Department of Labor (USDOL), employers must apply for WOTC and receive a certification verifying the new hire is a first-time, qualifying member of a targeted group before they can claim the tax credit.
To verify this information, you must have applicants complete IRS Form 8850, together with ETA Form 9061 or ETA Form 9062, before their start date. These completed forms must then be submitted to the state workforce agency in which your business is located within 28 calendar days after the new hire’s start date. Take the guesswork out of completing these forms and consider partnering with a solution provider like HRlogics WOTC, who will do the work for you!
After receiving the certification, taxable employers may claim the WOTC as a general business credit against their income taxes, as long as the certified employees have worked a minimum of 120 hours.
Does WOTC Expire?
WOTC is authorized until December 31, 2025, but to receive the credit for all new hires in a targeted group, you must submit an application for certification before the first 28 calendar days are up.
It’s important to note that there’s a proposal in the works that could overhaul the incentive, “to encourage longer-service employment, and to modernize the credit to make it more effective as a hiring incentive for targeted workers, and for other purposes.”
These changes could include:
Boosting the credit percentage to 50% for certified employees who have worked at least 400 hours in their first year.
Increasing qualified wage caps for certain target groups, allowing for higher credits.
Elevating credit for disabled veterans, long-term unemployed veterans, and long-term unemployed disabled veterans.
Maintaining the Summer Youth target group at 40%.
Eliminating the age ceiling for the SNAP target group, enabling certification for new hires meeting SNAP requirements.
For this shift to occur, Congress must negotiate a tax bill, often integrated into comprehensive legislative packages, like annual appropriation bills. Although these suggestions don't impact the current expiration date, Congress could extend it while reviewing these proposed changes.
Stay tuned to HRlogics, and we’ll keep you posted as these changes unfold!
About HRlogics & WOTC Benefits Solutions
HRlogics WOTC is your premier solution for maximizing the benefits of the Work Opportunity Tax Credit (WOTC) program. Our expert-driven approach simplifies the WOTC process, helping businesses of all sizes leverage this valuable tax credit to its fullest potential.
By offering a seamless integration of advanced software and personalized consulting, Total WOTC by HRlogics ensures that your company can efficiently claim eligible tax credits for hiring qualified individuals. Contact us to learn how HRlogics WOTC transforms the complex WOTC process into a streamlined, profit-enhancing strategy for your business.