On a number of occasions, the Work-Opportunity Tax Credit (WOTC) has gone into hiatus, however, that doesn’t mean employers should stop their WOTC processes. Again and again, the program has returned shortly after going into hiatus.
Since the WOTC program was first implemented in 1996, it has gone into hiatus seven different times, only to be renewed by Congress each time.
If there is a WOTC hiatus in the future, employers should continue to screen candidates in preparation for the program being restored and tax credits being allowed by the IRS to be applied retroactively. The only real difference between the program being in effect and being in hiatus is that State Workforce Agencies (SWAs) cannot process the WOTC certifications necessary to claim federal tax credits. As many employers know, WOTC certifications can sometimes be delayed so the hiatus shouldn’t make all that much of a difference for employers so long as the tax credit program is renewed.
For employers that are unable to screen candidates within the normal 28-day time frame, they will likely be able to capture that information at a later date for their applications to State Workforce Agencies. Historically, every time WOTC is renewed, the IRS creates a transition relief period in which employers are allowed to screen their candidates hired during the tax year outside of the 28-day time window.
Here is an example.
If WOTC goes into hiatus following December 31, 2025, but is renewed in April 2026, the IRS could create a transition relief period between the months of January and March to allow employers to screen all of the employees they hired during that time to see if they qualify for a WOTC certification.
The question employers should be asking themselves regarding WOTC is not if the program will be renewed, but how to best capture all of their newly hired employees who may be eligible for federal tax credits.
Employers that are not currently administering a WOTC program are missing out. Businesses leveraging the WOTC can receive tax credits up to $9,600 per qualified candidate. According to the DOL, employers in 2018 obtained 2.2 million WOTC certifications, representing billions of dollars in federal tax credits.
Employers that are seeking more information about the WOTC program or have questions about best practices should contact us. To learn how WOTC can be an asset for your business, we invite you to explore our TaxAdvantage solution.
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.