Earlier this year the federal Work Opportunity Tax Credit (WOTC) program was extended through December 31, 2025.
The Consolidated Appropriation Act, 2021 (CAA) reauthorized the WOTC program and will ensure that employers administering the program will continue to be able to earn up to $9,600 per qualified candidate. Also included in the CAA are extensions for the Federal Empowerment Zone Program, Indian Employment Credits, and Disaster Relief Tax Credits. According to a WOTC fact sheet issued by the U.S. Department of Labor (DOL), for the fiscal year 2021, state workforce agencies “received $18,485,000 to support the administration of WOTC, which includes certification process and reporting data on a quarterly basis.” The report also identifies the total number of certifications issued over the last several years:
FY 2020: issued 1,620,806 certifications
FY 2019: issued 2,068,417 certifications
FY 2018: issued 2,201,142 certifications
FY 2017: issued 2,027,012 certifications
Employers that have not taken advantage of the WOTC program should reconsider now that the program has been renewed. The Department of Labor cites that roughly $1 billion in tax credits are claimed through the WOTC program annually.
The WOTC program is simple in concept. Employers are incentivized to hire individuals from specific target groups that historically have faced barriers to finding work. You’re essentially hiring individuals that you need to hire anyway and in turn, helping support the community and generating additional income for your organization. That’s a winning combination. Currently, there are 10 target groups under WOTC that qualify for a tax credit, they are:
Supplemental nutrition assistance program (SNAP) recipients
Qualified IV-A recipients
Designated community residents (DCR)
Vocational rehabilitation referrals
Summer youth employees
Supplemental security income (SSI) recipients
Long-term family assistance recipients
Qualified long-term unemployment recipients
For more information on the 10 WOTC target groups, visit the IRS website.
Employers should note that the process for applying for tax credits involves a number of steps and IRS forms, including Form 8850, the pre-screening notice and certification request for WOTC, Form 5884-C for claiming the credit for tax-exempt organizations, as well as Form 3800 to claim the credit.
To make things even more difficult, employers are often faced with the challenge of determining when to apply an earned tax credit certification. While the IRS has suggested that employers claim the credit certification in the year it is issued rather than the year in which the tax credit is approved, it can be difficult to choose which method will better meet your needs.
Trusaic’s TaxAdvantageSM service handles all of the paperwork requirements, provides guidance on best practices for applying tax credits, screens individuals online and via telephone to verify eligibility, and maximizes potential earnings by ensuring all new hires are properly vetted for WOTC qualification.
TaxAdvantage also provides your organization with free tools, including an online platform, call centers to improve verification of employee WOTC info, and interactive tools for monitoring WOTC certification processes in real-time. If you’re new to WOTC, download our Tax Credits introduction flyer to learn more. Start hiring employees, serving the community you operate in, and generate additional income 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.