Business owners rejoice! The Consolidated Appropriation Act has extended the Work Opportunity Tax Credit (WOTC) program through the end of 2025.
Roughly 25% of all U.S. employees qualify for WOTC tax credits. The credits can range from $2,400 to $9,600, depending on worker category, number of hours worked and wages earned. For small business owners with employees, taking advantage of WOTC could save you thousands of dollars.
Let’s take a quick tour of the important things you should know about WOTC, like:
What Work Opportunity Tax Credits are
How they can benefit your business
How much you could be making
How to take advantage of the program
How Heartland helps
Sorry, What is WOTC?
Quite simply, the Work Opportunity Tax Credit (WOTC) is a tax incentive program available for employers who hire and retain people from groups who have had difficulty securing jobs.
And whether or not you realize it, you’ve likely hired at least a handful of employees who are WOTC eligible. Here are a few of the included categories:
Recipients of “Temporary Assistance for Needy Families”
Food stamp recipients
Designated community residents
Supplemental security income recipients
Long-term unemployment recipients
Summer youth employees
To read more about the 10 eligible groups, you can check out this page on the IRS website.
The Benefit for Your Business
Sometimes it’s hard to know which programs and incentives for business owners are really worth your time. In this case, the proof is in the cold, hard cash. According to the Department of Labor, about $1 billion in tax credits are claimed each year under the WOTC program.
There is a maximum tax credit that can be earned for each target group. But assuming you earn $2,400 in tax credits per new hire, the total tax savings per year could really add up.
New Hire x Tax Credits = Tax Savings Per Year
To survive COVID-19, many businesses were forced to significantly cut their operating costs. Now, estimating upcoming business volume and restaffing are becoming top priorities (look for our blog about the current hiring crisis coming soon).
Taking advantage of WOTC tax credits could make balancing your budget a little easier as you reopen or work on growing your business in the near future.
Some businesses may have been scared away by the additional IRS reporting required for the program, which we’ll cover in a moment. But fortunately, workforce management solutions are becoming an increasingly affordable solution to meet those needs.
Beyond the obvious financial gain, WOTC is designed to incentivize diversity and make quality jobs more accessible to all American workers. That’s a cause you can feel good about.
How to Get Started
There is a time element for WOTC credits, in that you must obtain certification that an individual is a member of the targeted group and file Form 8850 with your state’s workforce agency within 28 days of your eligible employee beginning work.
Seeking certification and maintaining the timeline can be difficult to balance with all your other responsibilities. But you don’t have to do it manually yourself. If you’re interested in taking advantage of the credits without adding complicated manual reporting to your plate, a workforce management solution is a great idea.
Heartland Hire is a recruiting and onboarding solution that allows you to automatically ask pre-screening questions to candidates or new hires. If they’re WOTC eligible, you’ll see the estimated tax credit value in their profile. Beyond WOTC, you’ll be able to easily track applicants, set up hiring processes and manage employee onboarding.
Heartland automatically captures all the information needed to make sure you’ve filed within the deadline from an applicant’s hire date, as well as calculating your total credits earned and providing a report.
Whatever method you choose, we hope you pursue WOTC tax credits in the future. It’s not every day you can add thousands to your bottom line simply by gaining a new employee!