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.
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.
According to the IRS, the targeted groups eligible for the WOTC program include:
This includes anyone receiving assistance from a state program funded by TANF, Temporary Assistance for Needy Families.
Qualified veterans of the WOTC program include:
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.
Qualified DCR individuals include those who are
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.
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.
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.
A qualified SSI recipient is someone who got SSI benefits within 60 days before they were hired.
A long-term family assistance recipient is qualified for WOTC if they have:
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.
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.
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!