The Work Opportunity Tax Credit Program is part of Department of Economic Opportunity’s initiative to create and maintain a stable economy for the state. The WOTC program recognizes that certain populations have difficulty finding jobs. To encourage businesses to hire within these populations, offers tax incentives to organizations and companies to do so. Businesses must learn how to qualify for a work opportunity tax credit before applying for the program. To learn more about the work opportunity tax credit application in and how to qualify, select from the topics below:
- What is the Work Opportunity Tax Credit Program?
- How to qualify for a work opportunity tax credit
- Completing the work opportunity tax credit application
What is the Work Opportunity Tax Credit Program?
The Work Opportunity Tax Credit Program in offers employers a way of lowering overall costs of doing business by reducing income tax liability. The WOTC program is a federal tax credit offered to employers who agree to employ individuals from at-risk groups. At-risk groups in the Work Opportunity Tax Credit Program are those determined to have barriers that traditionally keep them from employment prospects. Employers wondering how to qualify for a work opportunity tax credit should consider hiring candidates who are disabled, elderly, homeless, ex-military, low-income or rehabilitated felons. The tax incentive amount is dependent on the hire type as well as how long and often the employee works. Employers can find out more about government programs that benefit businesses in by downloading our free guide.
Both the employer and the employee benefit from the Work Opportunity Tax Credit Program, as the business receives significant savings and the worker gain employment. Employees enrolled in WOTC are often very eager to work and receive thorough training, making them great candidates for employment.
Learn How to Qualify for a Work Opportunity Tax Credit
To qualify for the Work Opportunity Tax Credit Program, an employer must hire from one of the target groups. An employer can qualify for WOTC if he or she hires veterans, recipients of government financial assistance programs like TANF and SNAP as well as individuals collecting SSI benefits. The work opportunity tax credit application requirements also apply to individuals living in an ’empowerment zone’. The Work Opportunity Tax Credit Program in does not limit the number of at-risk hires employers can claim.
Restrictions for WOTC include employees related to the company’s owner, majority holders of the business and former employees. The WOTC requires that the employer hire the employee for at least 120 hours in the first year. Once this is complete, the employer can request a percentage of the employee’s wages back as a tax credit. This portion depends on how many hours the employee works annually in addition to the target group he or she belongs. Employers can download our comprehensive guide to learn more about amount of tax credits available through WOTC.
Completing the Work Opportunity Tax Credit Application
The Work Opportunity Tax Credit Program in requires employers to comply with a number of submission procedures. The first step in the Work Opportunity Tax Credit application process is the Pre-Screening Notice and Certification Request (Form 8850), which the candidate and employer compete prior to the job offer. This from allows WOTC to officially state if the potential employee is part of the target group specified. The first page of this form will require the job applicant to give information about their situation, such as enrollment in financial assistance programs or veteran status.
The next step in the Work Opportunity Tax Credit application process is completing ETA Form 9061 (or 9062 as required) confirming WOTC eligibility requirements with documentation. Employers sign and date both completed forms to mail to the WOTC no later than 28 days after the employee starts work. Do not submit applications directly to the Internal Revenue Service, as they are not the processing agency for this program. Expedite the Work Opportunity Tax Credit application process by submitting the forms together as one application packet. Employers who miss the deadline will have their Work Opportunity Tax Credit application denied.
Final determination can take at least several weeks and are subject to delays if the agency requires additional documentation to prove inclusion in a target group. Documents needed to determine WOTC eligibility may include military discharge papers or proof of enrollment in assistance program like food stamps. If WOTC approves the application, then the employer will receive an official notification of eligibility. Once WOTC approved, then the employer will request the tax credit on the normal tax forms, filling out Form 5884 (of 5884-C) and submitting it with the entire tax return.
Employers who hire and claim credit under the WOTC will need to keep strict records as far as hours worked by the employee. Employers should keep records for at least three years, even if the employee leaves after the first year.