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Can your company take advantage of the Work Opportunity Tax Credit?


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Can your company take advantage of the Work Opportunity Tax Credit?

When it comes to hiring, employers have to weigh a number of considerations about a potential applicant. At your laundromat, potential applicants may be attractive based on their work histories, recommendations or availability.

Some employers, however, may want to consider hiring those who make them eligible for certain tax credits, like the Work Opportunity Tax Credit. Eligible to both private sector and qualifying non-profit organizations, the WOTC helps organizations lower their tax liability and meet their staffing needs.

Under the program, employers can claim a tax credit on their federal taxes for each qualifying new hire that falls within a targeted group. The WOTC allows employer to get credits against income tax on a percentage of first-year wages, up to $6,000 per employee. The WOTC program was recently extended by the Obama administration. On Dec. 19, President Barack Obama extended it through Dec. 31, 2014, and re-authorized the program for new employees hired on or after Jan. 1, 2015, the Department of Labor reported.

What groups are eligible for WOTC?
WOTC targets specific groups of people, so it’s important for employers to keep this in mind in order to take advantage of the credit. These groups include recipients/participants of:

  • Temporary Assistance for Needy Families
  • Supplemental Nutrition Assistance Program
  • Vocational Rehabilitation or Ticket-to-Work
  • Supplemental Security Income

In addition, veterans – those who are disabled, unemployed or receiving SNAP benefits – and those convicted of felonies may also be eligible for WOTC. Companies that employ veterans may will be eligible for a credit. Examples of veterans who may have WOTC eligibility include those who have received SNAP for three consecutive months within the last 15 months, those entitled to compensation for service-connected disabilities and those who were discharged from the military within a year prior to their official date of hire.

In addition, employers who hire recipients of public assistance may also be eligible to claim a credit of up to $9,000 in the first two years those recipients are employed under the WOTC.

What makes a company eligible?
Employers who hire a member of a targeted group are required to meet a number of set criteria in order to take advantage of the credit. For instance, hired employees under the credit must work at least 120 hours in order for companies to claim the credit. In addition, companies have to file a Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit with the Internal Revenue Service, to certify that an individual is a member of a targeted group. By doing this, companies can be compliant with the requirement and take advantage of the WOTC.