As organizations continue to look for ways to diversify their workforce, they should take note of an excellent cost-saving service known as the Work Opportunity Tax Credit (WOTC).
What is WOTC?
The WOTC program is simple. The government-sponsored program incentivizes companies to employ historically hard-to-hire workers. These individuals typically face barriers in finding work and as such, are usually receiving government assistance as means of support.
To help these individuals find work, and reduce the financial assistance they receive, the government offers tax credit savings to organizations that offer these individuals employment.
What are the WOTC target groups?
Currently, there are 10 target groups eligible for WOTC, they are:
Recipients of Temporary Needy Family Assistance
Unemployed veterans, including those who are disabled
Residents living in rural renewal counties or empowerment zones
Individuals referred by vocational rehabilitation
Summer youth living in empowerment zones
Individuals receiving supplemental nutrition assistance or food stamps
Recipients of Supplemental Security Income
People collecting long-term unemployment
Long-term family assistance recipients
Each of the above groups can earn employers different amounts of tax credits. Unemployed, disabled veterans, for example, can generate tax credit savings of up to $9,600. An eleventh target group, known as the military spouse, is currently making its way through the legislature.
The great thing about WOTC is that it not only helps individuals find work, but it helps organizations hire individuals with diverse backgrounds, which studies have shown can have a significant, positive impact on overall business performance and employee engagement.
In addition to helping attract and hire workers with diverse backgrounds, WOTC is a great way for organizations to increase their bottom line. Last year, the program generated over 2 million tax credits for employers, representing millions of dollars in savings.
WOTC qualification process
WOTC requires minimal effort up front and essentially screens new employees at the time of hire to see if they belong to one of the aforementioned target groups. If they do, the employer will need to submit Form 8850 to the appropriate State Workforce Agency within 28 days of the respective employee’s first day of work.
WOTC savings are typically applied against federal income taxes owed at the end of the year. The tax savings are most often based on wages eligible workers earn during their first year of employment.
Getting started with WOTC
The WOTC program is currently approved through December 31, 2025, so now is a great time to implement the low-cost initiative into your hiring process. Software is a great way to try the program without making a long-term commitment.
Trusaic’s TaxAdvantage program, for example, seamlessly integrates with your hiring process to ensure all new employees are screened for WOTC eligibility. We verify candidates through an online platform as well as via phone to ensure no tax credit savings opportunity is overlooked.
To further help you boost your savings, TaxAdvantage costs your business nothing upfront. Our fees are only requested once you receive the tax credits your employees have earned you.
If you’re new to WOTC, download our Tax Credits Introduction Flyer to learn more. Start hiring employees, serving the community you operate in, improving your business, and generating additional credit for your organization with WOTC today.
Tax credits are a great way for organizations to increase their bottom-line. If you’re interested in learning about WOTC, the ERC, or a different tax credit, contact us to see how we can help your organization start earning.