Hiring Incentives / WOTC, What is It? & Who Qualifies?
What is WOTC?
WOTC is a Federal tax credit created by the Small Business Job Protection Act of 1996 and the Welfare-to-Work Tax Credit of 1996. This credit is available to employers who hire and retain from target groups. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are a few simple steps to follow to apply for WOTC.
Is WOTC the Only Program We Review?
WOTC is a great program to start out with. But clients will benefit from looking at all Employer Based Tax Incentives. The next section of this article explains more. The most notable two programs in addition to WOTC are Section 41 R&D Tax Credit, and the Startup Tax Credits.
What Types of Employees Qualify?
From the 1940's through the 1990's:
Although many of these programs started out as programs specifically designed for Veterans, they were expanded in the 80's and 90's to include broader groups such as TANF Recipients, SNAP (Food Stamp) Recipients, Residents living in Empowerment Zones or Rural Renewal Counties), Employees receiving certain types of vocation training, Ex-Felons, Supplemental Security Income Recipients, Summer Youth Employees, and Seasonal Workers.
Into the 2000's....
The Financial Meltdown in the mid 2000's brought about a renewed focus on Job Creation. With this we saw massive expansion of Federal Tax Incentives for creating, and maintaining jobs. This was done through the Small Business Jobs Act, The American Recovery and Reinvestment Act, Numerous Job Creation and Protection Acts, and most notable the PATH Act signed by President Obama for effective changes in 2016 through 2022. As of December 20, 2019 WOTC was extended through December 31, 200
The pattern in the last decade is that with the passing of each Act, more and more companies are eligible for Employee based Tax Incentives that broaden not only WOTC itself, but hundreds of programs that surround it.
Virtually any business can now benefit from Employer Based Tax Incentives because even candidates that don't qualify for WOTC often qualify for other tax incentives.
Regardless of Any Individual Candidate or Employee
Virtually All Employers in These Industries Qualify for Employer Based Tax Incentives:
- Manufacturers
- Software Companies
- Producers of Products
- Architectural / Engineering / Design Groups
- Pharmaceutical Companies
- Labs
- Startup Companies
- Companies Performing Technical Functions
How are the Tax Credits Calculated?
Employers for WOTC candidates generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. The average benefit per employee is $2,400.00. The other fore mentioned Tax Incentives have their own specific calculation methods of which can be found by running Presentation Pro within the App.
Does My Client Qualify for WOTC?