Don’t Overlook the Work Opportunity Tax Credit (WOTC)

Posted by: Karen Booher on September 21st, 2021

In our daily interactions with many small-to-mid size Denver employers, it is common to hear that many companies aren’t fully aware of various programs that can benefit their companies. Therefore, we like to use our blog as a knowledge-sharing platform to help other Colorado companies.

The Work Opportunity Tax Credit (WOTC) is one such program worth highlighting.

What is WOTC?

The WOTC is a federal program that has been around for over 25 years. It was created to offer tax credits to businesses that hire individuals from certain target groups that face barriers to gaining employment (see IRS Form 8850 for complete list of qualifying criteria).

The tax credits range from $2,400 to $9,600 for each qualified employee. There is no limit to the amount of tax credits a business can earn from WOTC. The individuals must be a NEW hire and certain documents must be filed within 28 days of the employee’s hire date to earn the tax credits.

This is a voluntary program. Employers may not require new hires to provide this information; however, when it is included in your onboarding packets, many individuals will complete it.

Effects of the Pandemic on the WOTC Program

The pandemic has been a game changer for WOTC and there has been a large increase in the number of WOTC eligible employees. Many of these employees would not have previously qualified for the tax credit, but COVID really impacted businesses and employees from all industries.

Companies that previously looked at the WOTC program and felt their company would not benefit should consider participating in this tax incentive. The landscape has certainly changed and so has the labor market.

A Fast Growing Category – Long Term Unemployed Who Have Been Receiving Unemployment Benefits

Businesses can earn a $2,400 tax credit if they hire someone that was unemployed for 27 weeks or longer AND received unemployment compensation. This category alone has seen a significant increase in the number of qualified employees.

Unfortunately, many individuals lost their jobs during the pandemic and had to apply for unemployment compensation. As those employees start returning to the work force, many of them may qualify for WOTC.

This no longer limits the WOTC to certain pay ranges or certain skill sets. Individuals from nearly all skill sets and nearly all pay ranges were impacted by COVID and were faced with applying for unemployment benefits. These individuals may now qualify for tax credits under WOTC.

How Can You Get Started?

There are numerous companies that can assist you with implementing and managing this program. J. Kent Staffing’s vendor partner is MJA & Associates. If your company is interested in learning more about the WOTC program, we encourage you to contact them at 951-272-8294 or [email protected].

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Source:

“Don’t Overlook the Work Opportunity Tax Credit (WOTC)”, by Marcel Abandonato, MJA & Associates.