Your business might be eligible for the Work Opportunity Tax Credit if you’ve hired people with histories that might have otherwise prevented them from securing gainful employment.
Keep reading to learn how the Work Opportunity Tax Credit (WOTC) incentivizes diverse hiring practices while also giving marginalized members of society and struggling individuals a chance at a new start.
The WOTC is a federal tax credit designed to increase diversity and inclusion in the workplace while also providing stable and fulfilling jobs for skilled and qualified workers. The WOTC is only available for private sector employers, and it counts as a one-time credit that you can receive once for each new hire. There is no limit to the number of eligible hires for an employer.
To receive the WOTC, you must hire a new employee who belongs to one of several “target groups” (see below for more information). In most cases, employers who can verify their new hires’ affiliation with one or more of these target groups can receive one of two tax credits based on the employees’ work status:
The maximum credit per employee is about $9,600, although the exact maximum depends on several factors.
Employers who hire qualified long-term recipients of Temporary Assistance for Needy Families (TANF — one of the U.S. government’s federal assistance programs) may receive an extended tax credit under the WOTC program, which amounts to:
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To receive tax credits under the WOTC program, you must hire employees who belong to one or more of the following target groups.*
*All information in this section comes verbatim from the IRS WOTC website.
Employers who hire WOTC-eligible employees must verify that the employee falls within one or more of the target groups listed above by filing a Form 8850 within 28 days of the employee’s start date. Following certified verification, employers can claim the credit on their Form 3800. Tax-exempt employers should instead use Form 5884-C to receive a credit against their Social Security tax.
If you have questions about the eligibility of yo!ur business to obtain the credit, talk to us today!
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As you can see, understanding and applying for the Work Opportunity Tax Credit can get complicated in a hurry. It can be difficult to identify which target group(s) your employees might belong to, and even once you do, gathering and filing the requisite paperwork can prove time-consuming.
For help understanding the WOTC or any other business-related tax credits you and your company might be eligible for, please contact S.H. Block Tax Services today to schedule your free consultation. Our tax professionals have decades of experience resolving tax problems and helping individuals and businesses successfully file complex returns.
Schedule your free consultation today by completing this brief form or calling (410) 872-8376. We’re confident we can help you resolve any tax problems you’re experiencing and maximize your returns, and we look forward to speaking with you soon.
Reference
Work Opportunity Tax Credit. (2018, August 13). IRS. Retrieved from https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.
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