work opportunity, tax credit, wotc

*Updated – What’s the Deal with the Work Opportunity Tax Credit? (WOTC)

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*Updated – What’s the Deal with the Work Opportunity Tax Credit? (WOTC)

Scroll down to read more!
work opportunity, tax credit, wotc

Table of Contents

Update as of December 19, 2015: President Promptly Signs Government Funding and Tax Extenders Legislation – WOTC Survives through 2019.

One of my favorite tax credit programs if there ever was a thing as favorite tax credits is the Work Opportunity Tax Credit or WOTC. Unfortunately, the DOL hasn’t updated their website to discuss some of the recent updates and changes in relation to the WOTC hiatus. You might be wondering what this means.

From the DOL:

The WOTC authorization expired on December 31, 2014, placing WOTC in a “hiatus” period again starting on January 1, 2015. ETA provided procedural guidance to the SWAs and the employer community in Training and Employment Guidance Letter (TEGL) No. 8- 13 regarding requests for certifications submitted to SWAs during the 2014 authorization lapse. Similar to the 2014 hiatus period, and specifically in the 2015 hiatus period, states can accept applications for new employees in the current WOTC target groups hired on or after WOTC Program Guidance January 7, 2015 January 1, 2015, but must postpone final processing of those certification requests pending further Congressional legislative action.

The Work Opportunity Tax Credit is not a new program. It’s a federal tax credit available to employers for hiring individuals from certain target groups. These target groups are explained more below. The status of the WOTC has been a hard one to follow. It was on hiatus, re-enacted and placed on hiatus again which is confusing. I can’t keep up with the on again, off again relationship status. I just wanted to know if there was an active program for the WOTC?

In 2015 the WOTC was again re-enacted retroactively. Businesses had a short window in April 2015 to screen applicants and apply for this credit. States were given the opportunity to process WOTC requests from 2013 and 2014 but not 2015. This makes for a very confusing program, and one that I am certain employers are not taking advantage of because there isn’t any clear communication from any government agencies including the DOL or the IRS.

The WOTC process is already hard to follow like any government tax credit program. It’s why most employers outsource these efforts using a PPO or an unemployment and tax credit claim management company.

What is the Work Opportunity Tax Credit?

Under the Work Opportunity Tax Credit, Employers can hire eligible employees from the following target groups and receive a tax credit

Unemployed Veterans (including disabled veterans)

Temporary Assistance for Needy Families (TANF) Recipients

Food Stamp (SNAP) Recipients

Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)

Vocational Rehabilitation Referred Individuals

Ex-Felons

Supplemental Security Income Recipients

Summer Youth Employees (living in Empowerment Zones)

The tax credit itself is equal to 25% or 40% of a new employee’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. They DOL has a handy WOTC Calculator to see how much your business can earn in tax credits which would be extremely helpful if employers were able to submit 8850 documents for the WOTC credits for any hires made in 2015.

For Veterans under the VOTC program, the maximum amount of the tax credit (displayed on the right) is as follows but depends on a few factors as outlined below. (data courtesy of the Department of Labor)

Receives SNAP (food stamps) benefits $2,400
Entitled to compensation for service-connected disability
Hired one year from leaving service $4,800
Unemployed at least 6 months $9,600
Unemployed
At least 4 weeks $2,400
At least 6 months $5,600

For other WOTC groups as listed in the bullets above, employers can receive the maximum tax credit amount listed on the right.

Receives SNAP (food stamps) benefits $2,400
Entitled to compensation for service-connected disability
Hired one year from leaving service $4,800
Unemployed at least 6 months $9,600
Unemployed
At least 4 weeks $2,400
At least 6 months $5,600

The tax incentive has historically been quite beneficial for firms who are employing in these targeted demographics, notably in sectors like retail, hospitality, contact centers, and restaurants. In order to maximize the prospective tax benefit, I personally preferred to utilize the neighborhood one stops and unemployment offices. Unfortunately, there isn’t much guidance on when firms will be able to submit documentation for the tax credit in the future for the years 2015 and 2016.

The WOTC program is crucial, particularly in a market with a skills shortage. Employers aim to cut their costs associated with employment. This would be made possible by a scheme like the Work Opportunity Tax Credit, especially in light of the fact that my top three untapped talent sources for 2016 are veterans and military spouses, ex-felons, and people with disabilities.

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16 Comments

  1. In your research , have you calculated the number of hardworking Americans laid off and/or terminated for employers to take advantage of this program? Do not think for one minute they are hiring ADDITIONAL employees!

  2. How does WOTC help older middle aged or senior workers? It seems to stop at age 39 and creates incentives for age discrimination in hiring. Older workers need to be included because they are first laid off/fired and last hired and never hired back at a living wage either.

  3. This looks to me like a way for employers to screen out people NOT on welfare, food stamps or who are NOT currently unemployed. So if you have managed to keep a job but want/or need a change or chose not to go on assistance and be frugal you may not get hired because you will not afford an employer a Tax Credit!

  4. Hi Jessica, my business is trying to hire job seekers with severe learning disabilities. Do you have any information as to what group they may fall in as I would like to take advantage of the WOTC? Thanks!

  5. Hello, Jessica,
    I was recently hired by a hospital that is offering a 5k sign on bonus for nurses. I am a new graduate nurse but the offer that’s posted on indeed and the hospital’s website specifies the requirement “hold a current license or be eligible to sit for licensure as an RN.” I applied for the job, was offered the job and accepted it, I hadn’t sat taken the NCLEX but did about two weeks after being hired. Prior to being hired, I inquired about the 5k bonus being advertised but was told it wasn’t for new graduates and only for experienced nurses. Though the advertised listing for the position mentioned nothing about being a new graduate, in fact stated be eligible to test for licensing. If you’re an experienced nurse, you must have already had your license in order to gain that experience so obviously HR was lying to me. Also, I am a service connected disabled veteran (rated at more than 30%) and I have been unemployed for more than 6 months prior to hiring. This means the for profit hospital will definitely receive the $9,600 WOTC for hiring me. How would you suggest that I go about enforcing their listing for the $5k sign on bonus? Especially considering the agency is going to be receiving the $9,600 WOTC for hiring me. It’s irritating and annoying that HR lied to me about what the advertisement for employment said. Also, I required far less training than other new hires because I trained at that particular hospital.
    Any suggestions you have would be greatly appreciated.
    Thank you

  6. I forgot to add, that I now have my license to practice as an RN through the state’s board of nursing. Not sure if that might matter for your response but I am a licensed RN.

  7. Hi, We acquired a convenience store business which had an employee who has some autistic disabilities and can only work 25 hours per week. (according to his dad) This gentlemen is 52 years old. Does this qualify us as the employer WOTC? Any information would be appreciated and helpful. Thank you

  8. Hi Jessica.
    I am looking for a new full time job and yesterday I got a call from one of the companies I applied for they told me that they will let me know if I will be elected for a face to face interview then today I got an email from that company saying ” Thank you for continued interest in the position we are offering.. bla bla bla.. As part of the application process, we ask that you complete the questionnaire in order to assess eligibility for the Work Opportunity Taxes Program (WOTC)” the go on with the email then they sent me an attachment and it is a ADP page asking me for personal info like my Social Security and other info, I replied to them that I could not share such a personal info by email . This is the first time I apply for a job and they ask me for my Social Security even before they see me in person… Is this common for companies to do? And why they want to check if I qualify ? I am a little bit confuse with this . Can u please help me clarifying this? Also what can I expect after I complete that questionnaire ? If I decide to do that?
    Thank you very much!
    Carolina.

  9. Carolina, i notice your answer was not addressed. I myself have never Been asked to complete any such form and i reacted like you did. I wish someone would respond.

    Leila

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