The Work Opportunity Tax Credit (WOTC) is a hiring incentive program that gives employers tax credits for hiring employees from these categories:
- Unemployed Veterans (including disabled veterans)
- Temporary Assistance for Needy Families (TANF) Recipients
- Food Stamp (SNAP) Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referred Individuals
- Supplemental Security Income Recipients
- Summer Youth Employees (living in Empowerment Zones)
- Qualified Long-Term Unemployment Recipients
Over 12 million employees have been WOTC certified since the program's inception in 1996. Annually, employers claim over $1 billion in tax credits under the WOTC Program. President Obama reinstated the WOTC program in December 2015, through December 31, 2019.
The WOTC provides a win-win opportunity for both employers and job seekers. It gives hard-to-hire individuals who want to work the chance for employment and rewards employers who hire them. Horizon can take the stress out of the WOTC certification process, allowing you to hire job seekers who are eager to work for you.
Partnering with EfficientHire, Horizon Payroll Solutions offers a complete, cloud-based WOTC service. Here is how it works:
- During electronic onboarding, the employee completes the WOTC questions to determine eligibility. The questions are simple sentences in plain English or Spanish, in a logic-driven interview style. No more paper forms, phone interviews, or missed deadlines to the State for WOTC forms.
- If eligible, the IRS forms 8850 & 9061 are fully completed based on the responses and eSigned by the employee.
- After approval from the Manager/Admin and any supporting documentation is uploaded, EfficientHire takes it from there. Processing, submitting to the State Workforce Agency, follow-up, appeals, etc…. they do all of the heavy lifting. Payroll data is used for tracking the hours and wages necessary for credits. EfficientHire handles that hard work through their proprietary software.
- As your WOTC credits build, you will see your Credit Gain Reports by month right in the Solution. Your Potential Pending Credit Reports are available to review, as well. Many clients use these reports for calculating against quarterly tax estimates. However, you will want to consult your tax advisor for the best use of the WOTC credits available to you for your company.
The IRS requires the WOTC forms to be completed and sent to the State Workforce Agency within 28 days of the employee’s start date. How will you fit all of that into your current employee onboarding process? The screening questions, risking mistakes on paperwork, documentation, deadlines – is all of that work worth it?
The WOTC certification process is complex and if you hire frequently or in large numbers, it’s easy for a potentially eligible employee to slip through the cracks or to stop screening your new hires altogether! Once you submit the WOTC application, you need to track hours and wages: employees must work a minimum of 120 hours and earn a percentage of their first-year wages before you can claim the credit. Each target group has a maximum credit amount your company can earn for each eligible employee. You also need to learn how to calculate and file for the credit with the IRS when tax time comes around.
Did You Know?
- Your business could receive $1,200 to $9,600 in tax credits per WOTC certified employee (with no limit on the number of employees), so it’s worth your while to screen new hires for eligibility.
- According to the Ohio Department of Job and Family Services, in FY 2016 Ohio processed more than 104,000 WOTC certifications, leading to over $250 million in tax credits for employers.
- Your tax credit reduces your tax liability, freeing money for other business expenses. Money saved through WOTC would even offset the cost of your outsourced payroll services!
- Many industries benefit from the WOTC. For example, in FY 2014, of the 1,304,460 WOTC certified employees nationwide, 30.8% worked in sales (retail, grocery, etc.), 19.9% in office and administrative support, 17.7% in production work (manufacturing, machining, etc.) and 16.2% in food preparation and serving. Source: U.S. Department of Labor
- Horizon Payroll Solutions has helped a restaurant industry client earn $10,000 in credits, a senior care employer earn $20,000 and an in-home health care employer earn close to $30,000.
WOTC encourages workplace diversity and is an incentive to bring good jobs to workers who need them. It helps targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers. What’s more, federal spending on the WOTC program saves money spent on public assistance programs.
Horizon Payroll Solutions WOTC Services
Seamless WOTC Screening Built Into Onboarding
WOTC screening happens during onboarding, right as your employee fills out your other new hire forms – this ensures the 28-day window is not missed. Easy-to-use online screens ask questions in plain English or Spanish to identify eligible employees. Based on his or her answers to the initial questions, a list of needed supplemental documents is generated and the employee can eSign the forms. This way, you save time on printing and keeping track of physical paperwork. Your manager or admin staff approve applications, and all paperwork is sent to your SWA. Monthly wage and hour reports and tax credit reports help you keep track of important data. When it’s time to file taxes with the IRS, you’ll receive a final report to submit with your tax documents and claim your credits (Year-end Report).
Horizon and EfficientHire have over 10 years of experience processing WOTC applications, tracking employee data and compiling the information you need to claim your tax credits. As an employer, you can trust the team to know the details needed and exactly how to complete all required forms accurately, including IRS form 8850 and ETA form 9061. In addition, the solution automatically identifies the supplemental documentation that may be required (i.e. photo ID, military discharge papers, TANF letter, etc.). No matter what method the State requires for submitting the forms (mail, email, fax), the team knows the procedures for each State Workforce Agency and will ensure no deadline is missed! You can also trust Horizon and EfficientHire to stay up-to-date on changes to the WOTC program.
Horizon can help you understand the details of claiming WOTC credits on your tax return. For example, your company must have taxable income in order to apply the credit (though the IRS allows you to carry-back the credit one year or carry-forward up to 20 years). What’s more, if you claim other General Business Credits in addition to WOTC, you need to ensure credits are applied in the correct order. See the instructions for IRS form 3800 for more information on the Credit Ordering Rule.
Cloud-Based Documentation and Storage
Storage in the cloud means secure access to your documents when and where you need it. Employees create a password and PIN to safeguard their personal information and forms. EfficientHire will automatically backup your data to ensure you always have access to your completed 8850 and 9061 forms, supplemental documents, reports, and the latest payroll and personnel data. Most of the WOTC documentation must be kept for three years from the date when any income tax return claiming the credit is due or filed, whichever is later; by keeping it in the cloud reduces time spent managing paper files in case of an audit.