The Work Opportunity Tax Credit (WOTC) is a federal tax credit that is available to employers who hire and retain individuals from certain targeted groups that have consistently faced significant barriers to employment. Employers can earn up to $9,600 per qualified employee which is taken as a federal income tax credit on your federal income tax returns. If you are an employer looking to implement a WOTC program, there are a few key things that you can do to help ensure success:

1. Identify the targeted groups that you are eligible to hire and retain under the WOTC program. These include individuals who are receiving certain forms of public assistance, veterans, ex-felons, and people who live in certain geographic areas such as Empowerment Zones or Rural Renewal Communities.

2. Develop a recruitment and hiring process that is designed to attract and retain individuals from these targeted groups. This may include outreach to community organizations and job training programs, as well as the use of targeted recruitment and hiring strategies.

3. Train your HR staff and Hiring Managers on the WOTC program and how to properly document and certify eligible employees. Employers only have 28 days from the time of hire to file the paperwork necessary to certify an eligible employee. Once the 28-day window expired you cannot claim the WOTC credit on that employee. Developing a tracking system for new hires will be a key component to maximizing your WOTC program and value.

4. Follow all relevant regulations and guidelines when claiming the tax credit, including those related to documentation, timing, and record keeping. The IRS can audit your WOTC credit, and you will need to show proof that the employees you took credit were certified as WOTC eligible.

5. Monitor the effectiveness of your WOTC program and make necessary adjustments to ensure its continued success. Monitoring should include monthly/quarterly screening compliance reports (i.e., how many new hires completed the required paperwork); tracking any denials you have received from the state agencies; creating a process for appealing those denials (you have one year from the date of denial to appeal the decision) and continual training for your HR and hiring team to make sure they are requiring employees to complete the WOTC paperwork.

Trying to implement and monitor a WOTC program often requires more time and energy than an already overworked HR department can manage. We are here to help companies that don’t have the bandwidth to properly administer the program internally. We will screen your employees and submit the necessary paperwork to the state agencies to ensure we meet the 28-day deadline for certification of WOTC eligible employees. In addition, we will provide regular reporting so you can track the success of the program on a monthly or quarterly basis.  This program is a valuable tax incentive that can help save your company money while hiring new employees and reduce company overhead. To learn more about WOTC, please reach out to a member of the Research Credits and Incentives team to get more information.