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What Is The Work Opportunity Tax Credit (WOTC) And How Can It Help Your Business?

The Work Opportunity Tax Credit (WOTC) is a fantastic way for businesses to save on taxes while making a positive impact. It’s a federal tax credit that rewards employers for hiring people from certain groups who face barriers to employment. By taking advantage of the WOTC, you can reduce your tax bill and help create a more diverse and inclusive workforce.

Who Can Qualify for the WOTC?

You can claim the WOTC if you hire someone who falls into one of these target groups:

  1. Veterans: Including those who’ve been unemployed for a while or are receiving government benefits.
  2. Ex-Felons: People hired within one year of their release or conviction.
  3. Designated Community Residents: Individuals aged 18–40 living in specific underserved areas.
  4. Vocational Rehabilitation Referrals: Individuals with physical or mental disabilities referred by rehabilitation agencies.
  5. SNAP Recipients: People receiving Supplemental Nutrition Assistance Program (SNAP) benefits.
  6. SSI Recipients: Those receiving Supplemental Security Income (SSI).
  7. Long-Term Unemployed: Anyone unemployed for 27 weeks or more.

 

How Much Can Your Business Save?

The amount of the credit depends on the employee’s wages, hours worked, and their target group:

  • Credit Amounts: Typically range from $1,200 to $9,600 per eligible employee.
  • How It’s Calculated: The credit is based on a percentage of the wages you pay them in their first year (up to $6,000 in most cases).

How to Claim the WOTC

Here’s how you can take advantage of this credit:

  • Screen New Hires: Use IRS Form 8850 to check if your new employee qualifies.
  • Submit Forms Quickly: File Form 8850 and ETA Form 9061 with your state workforce agency within 28 days of the hire date.
  • Track Wages and Hours: Keep detailed payroll records for the qualifying period.
  • Claim the Credit: Use IRS Form 5884 when you file your business tax return.

We’re Here to Help!

Claiming the WOTC doesn’t have to be complicated. If you have questions or need a hand, reach out to our Hive KPO Team, who can guide you through the process. If you are already an active HIVE customer and are interesting in the WOTC Credit and developing programs to hire from one of these target groups, reach out to your designated HIVE representative to get started.

Disclaimer: This article is provided for informational purposes only and does not constitute legal, tax, or financial advice. For specific guidance regarding your situation, consult with a qualified attorney or certified public accountant (CPA). If you are enrolled in HIVE Services, your designated contact will advise you and determine if additional external guidance is necessary.