Work Opportunity Tax Credits - WOTC

Dollar-for-dollar credit against an individual and/or corporate taxpayer's income tax liability as an incentive to hire people in target groups 

Employer tax credits are an important part of the diverse strategies designed to help people gain on-the-job experience and acquire better employment. The Work Opportunity Tax Credit (WOTC) program offers federal tax credits to employers as an incentive to hire people in several specific target groups. Tax credits are dollar-for-dollar against an individual and/or corporate taxpayer's income tax liability.

WOTC helps both employers and targeted job seekers. Employers save as tax credits help defray payroll expenses. Job seekers who qualify as a member of one of the targeted groups gain an advantage in the job market.

WOTC has a two-tiered credit based on the first $6,000 of earnings: 

• A 25% credit for workers who worked at least 120 hours but less than 400 hours
• A 40% credit for workers who worked at least 400 hours ($2,400 maximum credit)

Who are the Targeted Groups? 

• TANF Recipient. A member of a family that has received Temporary Assistance for Needy Families through a program such as a Temporary Assistance Program (TAP) for at least any nine months within the last 18 months
• Veteran. A veteran and member of a family that received food stamps for at least a three-month period within the last 15 months
• Ex-Felon. A person convicted of a felony, who, within the past year, was either convicted or released from prison
• Vocational Rehabilitation Referral. A disabled person who has completed or is completing rehabilitative services from a rehabilitation agency approved by the state or the Department of Veterans Affairs
• Food Stamp Recipient. A person between the ages of 18 and 39, and a member of a family that has received food stamps for the last six months, or received food stamps for at least three of the last five months, but is no longer eligible to receive them
• SSI Recipient. A person who has received Supplemental Security Income (SSI) under Title XVI of the Social Security Act benefits for any month ending within the last 60 days
• Long-term Family Assistance Recipient. An individual may be certified as a long-term family assistance recipient if he or she is a member of a family that:
  • Received TANF payments for the 18 month period (consecutive) ending on the hire date, or
  • Received TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, or
  • After August 5, 1997, stops being eligible for assistance payments because federal or state law limits the maximum period such assistance is payable, and the individual is hired not more than two years after such eligibility for assistance ends

Federal Renewal Community and Empowerment Zone Credit/Deduction
The major benefits of this credit include the following: 

• Employer Wage Credits: Businesses can take an annual tax credit of up to $1,500 in an Renewal Community, and, $3,000 in an Empowerment Zone for each employee who lives and works for the business in the respective area
• Sec. 179 Deduction: Sec. 179 deduction for “qualified zone property” placed in service by an FRC or FEZ business of up to $35,000

How alliantgroup Can Assist You
Prior to being hired, the candidate (during employment interview) must meet at least one of the eligible criteria outlined on IRS Form 8850 “Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Tax Credits.” If the candidate is hired and meets at least one of the criteria, the candidate needs to complete and sign Form 8850 when hired. Within 28 days after the hire date, alliantgroup will mail the signed IRS Form 8850, along with ETA Form 9061 “Individual Characteristics Form,” to the State Employment Security Agency WOTC Coordinator for certification. alliantgroup will then track certification of the employee and appeal a rejection if necessary. alliantgroup will also track the wages of certified employees and compute the credit for use on the taxpayer's return.

For more information, please click here to contact alliantgroup.
For immediate assistance, contact David Ji.