Are You Taking Advantage of US Work Opportunity Tax Credits?

Are You Taking Advantage of US Work Opportunity Tax Credits? US Tax Works 2.0 Can Help!

The Work Opportunity Tax Credit is a federal tax program that is administered by each state’s workforce development department. The intent of the program is to incent businesses to hire people that struggle to find work due to circumstances in their lives.

The program awards tax credits to businesses who hire applicants from certain target groups. These include members of households that receive(d) TANF or SNAP benefits, unemployed veterans, veterans with service disabilities, former felons, persons receiving SSI benefits, persons that have been unemployed for extended periods and collected unemployment benefits during that time.

To qualify, the new hire must be certified by the Workforce Development Department in the state where they work. The applicant fills out the IRS 8850 form that asks about the above conditions. That form along with other IRS forms must be submitted to the state’s Workforce Development Department within 28 days of the first day worked for consideration. If they meet the requirements, the Department will “certify” them.

The credits are based on a percentage of the gross payroll for these persons during their first 12 months of employment. They must work a minimum of 120 hours to qualify.

At tax time, there is a calculation made for each certified employee on yet another IRS form that is filed with the employer’s tax return. The employer’s tax liability is reduced by the amount of the credits. The employer can receive a credit of up to $9600 per certified new hire.

In the event the employer has more credits than their tax liability for that year, the credits can be rolled forward for up to 20 years.

The Work Opportunity Tax Credit has been around in its current form since 1996. It is a legislated program and is currently authorized through 2025. Legislation has been introduced to make the program permanent. The US Department of Labor reports that there were 2,081,474 WOTC certifications in 2021 an increase over 2020 of 28%.

In our current labor climate, employers must look deeper into the talent pool to find the workers they need to take care of their customers. In fact, many employers are hiring from the WOTC target groups and don’t realize they can earn credits for those hires.

The WOTC target groups are made up of potentially great employees who need a little help to become a productive part of our workforce. WOTC allows employers to earn tax credits while expanding their workforce and helping challenged groups find gainful employment.

For further information, please contact Dhane Marques Dhaneb.marques@gmail.com 901.489.8849