--- title: "WOTC Tax Credit: How Does it Work? | LedgerFi" description: Learn how the Work Opportunity Tax Credit (WOTC) helps small businesses save on taxes by hiring from targeted groups. image: https://www.ledgerfi.co/hubfs/LedgerFi-OG-Default.png --- Tax Optimization # WOTC Tax Credit: How Does it Work? Learn how the Work Opportunity Tax Credit (WOTC) helps small businesses save on taxes by hiring from targeted groups. [ Nathan Hodgens ](https://www.ledgerfi.co/resources/author/team-ledger) May 19, 2025 [mailto:?subject=Check%20out%20https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work&utm_medium=social&utm_source=email%20&body=Check%20out%20https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work&utm_medium=social&utm_source=email](mailto:?subject=Check%20out%20https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work&utm_medium=social&utm_source=email%20&body=Check%20out%20https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work&utm_medium=social&utm_source=email) [Tax Optimization](https://www.ledgerfi.co/resources/tag/tax-optimization) #### TABLE OF CONTENTS - [How Does the WOTC Work?](https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work#Pre) - [Who Are the Targeted Groups](https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work#According) - [How Can an Employer Claim the Tax Credit](https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work#In) - [Bottom Line](https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work#The) ![WOTC Tax Credit: How Does it Work?](https://www.ledgerfi.co/hubfs/AI-Generated%20Media/Images/Create%20a%20professional%20and%20welcoming%20hero%20image%20for%20a%20financial%20blog%20titled%20WOTC%20Tax%20Credit%20How%20Does%20It%20Work%20The%20scene%20should%20feature%20a%20small%20business%20owner%20shaking%20hands%20with%20a%20new%20hire%20symbolizing%20an%20inclusive%20hiring%20practice%20Represent%20diverse%20indiv-1.jpeg) × Need Help Fast? Talk to an Expert Instantly [** Call now ** ](tel:+18886026210) [ Schedule call ](https://meetings.hubspot.com/jeremy721/web-consultation?uuid=72d6ad92-b616-4404-8180-05ac0a3a20cd) ## **WOTC Meaning?** WOTC stands for “work opportunity tax credit.” Essentially, this is an incentive for employers to hire individuals from specific targeted groups.  Not only does this help employers with federal tax credit, but it also helps certain individuals who may be struggling with employment.  ## **How Does the WOTC Work?** Prescreening is required to confirm that an employee is eligible for the WOTC program. For the employee to be certified, employers must use Form 8850. Upon completion of the form by the employee, employers must submit the form to the state workforce agency, where they will verify whether the employee is eligible for the WOTC program. ## Still Have WOTC Questions? Talk to an expert directly! Call now at (888) 602-6210 [** Call now ** ](tel:+18886026210) ## **Who Are the Targeted Groups?** According to the IRS, the targeted groups eligible for the WOTC program include: ### **Qualified IV-A Recipient** This includes anyone receiving assistance from a state program funded by TANF, Temporary Assistance for Needy Families. ### **Veterans** Qualified veterans of the WOTC program include: - Veterans receiving assistance under the SNAP program - Unemployed veterans  - Veterans who are entitled to compensation for a disability that was connected to their act of service  ### **Ex-Felons ** If an ex-felon is hired during the same year that they have either been convicted of or released from a felony, then they may be considered a “qualified ex-felon” for the WOTC program. ### **Designated Community Resident (DCR)** Qualified DCR individuals include those who are - At least 18 years old and under 40 - Primary residents within an empowerment zone (EZ) or a rural renewal county (RRC) ### **Vocational Rehabilitation Referral** If you have been referred to an employer upon completing rehabilitative services such as a state plan, employment network plan, or a program that is under the Department of Veterans Affairs, then you may be qualified for the WOTC program. ### **Summer Youth Employee** For a summer youth employee to be qualified for WOTC, they must be at least 16 years old, reside in an empowerment zone, and have only performed services between May 1 and September 15. ### **Recipients of SNAP (Supplemental Nutrition Assistance Program)** If a recipient of SNAP has been hired while they have received benefits for 6 months and is at least 18 years old and under 40, then they qualify. ### **Recipients of Supplemental Security Income (SSI) ** A qualified SSI recipient is someone who got SSI benefits within 60 days before they were hired. ### **Long Term Family Assistance Recipient  ** A long-term family assistance recipient is qualified for WOTC if they have: - Received assistance under an IV-A program for at least 18 months in a row - Stopped receiving assistance under an IV-A program due to a time limit that was set by the law ### **Long-Term Unemployment Recipient** Individuals who have been out of work for at least 27 weeks in a row and received unemployment benefits before they got hired are considered qualified long-term unemployment recipients. For more information regarding requirements for any of the qualified groups mentioned above, check out the [IRS WOTC page](https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit). ## **How Can an Employer Claim the Tax Credit?** In order for an employer to actually claim the tax credit benefit from qualified employees, the employer must first wait for completion of prescreening and approval of Form 8850 from the state workforce agency. After approval has been accepted, employers are able to use Form 8850 when they file their business taxes in order to receive the benefits of WOTC. ## Still Have Questions? Talk to an expert directly! Call now at (888) 602-6210 [** Call now ](tel:+18886026210) [ Schedule a call ** ](https://meetings.hubspot.com/jeremy721/web-consultation?uuid=27a565c2-a1b5-4aab-857e-4f61ccf3f514) ## **Bottom Line of WOTC** The WOTC is a win-win for both the employer and employee. Not only does this help those who are struggling to find work due to their own struggles, but it also helps employers save on taxes. While there are various qualifications that need to be considered, they are still worthwhile for employers to consider when choosing a candidate for the job. For help when filing with a tax credit received by WOTC employees, [contact our team at LedgerFi!](https://meetings.hubspot.com/jeremy721/web-consultation?uuid=ca861878-cb0c-4847-bcce-aac584da8203) ## Similar posts Tax Optimization ### [How Does Net Operating Loss (NOL) Work?](https://www.ledgerfi.co/resources/how-does-net-operating-loss-nol-work) Learn how Net Operating Loss (NOL) works and how small businesses can use it to reduce future taxes. Nathan Hodgens Jun 19, 2025 Business Structure ### [What is: Partnership?](https://www.ledgerfi.co/resources/what-is-partnership) Thinking of starting a partnership? Learn how business partnerships work, including types, taxes, pros, cons, and how to set one up—step-by-step. Nathan Hodgens May 22, 2025 Business Growth ### [Key Deductions and Credits Explained for Small Business Taxes](https://www.ledgerfi.co/resources/key-deductions-and-credits-explained-for-small-business-taxes) Maximize your tax savings with key small business deductions & tax credits. Learn how to reduce taxable income, claim clean energy & EV credits, &... Nathan Hodgens Mar 3, 2025 ## Talk to a Small Business Advisor Today ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Nathan Hodgens", "url" : "https://www.ledgerfi.co/resources/author/team-ledger" }, "dateModified" : "2026-04-13T19:06:06.077Z", "datePublished" : "2025-05-19T15:58:31.000Z", "headline" : "WOTC Tax Credit: How Does it Work?", "image" : [ "https://www.ledgerfi.co/hubfs/AI-Generated%20Media/Images/Create%20a%20professional%20and%20welcoming%20hero%20image%20for%20a%20financial%20blog%20titled%20WOTC%20Tax%20Credit%20How%20Does%20It%20Work%20The%20scene%20should%20feature%20a%20small%20business%20owner%20shaking%20hands%20with%20a%20new%20hire%20symbolizing%20an%20inclusive%20hiring%20practice%20Represent%20diverse%20indiv-1.jpeg" ], "mainEntityOfPage" : { "@id" : "https://www.ledgerfi.co/resources/wotc-tax-credit-how-does-it-work", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.ledgerfi.co/hubfs/ledger-logo-green%20(3).svg" }, "name" : "Ledger Fi" } } ``` ```json { "@context" : "https://schema.org", "@id" : "https://www.ledgerfi.co/#organization", "@type" : [ "AccountingService", "LocalBusiness" ], "address" : { "@type" : "PostalAddress", "addressCountry" : "US", "addressLocality" : "Cupertino", "addressRegion" : "CA", "postalCode" : "95014", "streetAddress" : "20065 Stevens Creek Blvd. Ste.B-1B" }, "areaServed" : [ { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "California" }, "name" : "San Jose" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "California" }, "name" : "San Francisco" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "Illinois" }, "name" : "Chicago" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "California" }, "name" : "Irvine" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "Texas" }, "name" : "Austin" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "Arizona" }, "name" : "Phoenix" }, { "@type" : "City", "containedInPlace" : { "@type" : "State", "name" : "Florida" }, "name" : "Orlando" } ], "description" : "LedgerFi provides bookkeeping, payroll, and expert tax strategy coaching for small businesses. Founded by dedicated team members serving the Bay Area, Chicago, Orange County, Austin, Phoenix, and Orlando.", "logo" : "https://www.ledgerfi.co/hubfs/ledgerfi-logo-green%20(3).svg", "name" : "LedgerFi", "openingHours" : "Mo-Fr 09:00-17:00", "priceRange" : "$$", "sameAs" : [ ], "telephone" : "+18883469609", "url" : "https://www.ledgerfi.co" } ``` ```json { "@context" : "https://schema.org", "@id" : "https://www.ledgerfi.co/#website", "@type" : "WebSite", "description" : "AI-powered bookkeeping, payroll, and tax strategy for small businesses. Every account managed by a dedicated team member.", "inLanguage" : "en-US", "name" : "LedgerFi", "publisher" : { "@id" : "https://www.ledgerfi.co/#organization" }, "url" : "https://www.ledgerfi.co/" } ```