How to Benefit from the Work Opportunity Tax Credit

SEE ALSO >>> Business Tax

Is your business ramping back up after a pandemic-related slowdown? By hiring employees from specific “target” disadvantaged groups, your business may qualify for the Work Opportunity Tax Credit (WOTC) — thus helping both the business and your new employees. Scheduled to expire after 2020, the WOTC was recently extended for five years, through 2025, by the Consolidated Appropriations Act.

Generally, the WOTC equals 40% of the first $6,000 of first-year wages, for a maximum of $2,400 per worker. But it can be more. For example, if you hire disabled veterans who’ve been unemployed for at least six months, you may be eligible for a maximum of $9,600 per worker.

The WOTC is currently available for these target groups:

  • IV-A Temporary Assistance for Needy Families (TANF) recipients. These are members of families receiving assistance from a state plan approved under Part A of Title IV of the Social Security Act relating to TANF.
  • Veterans. A veteran may qualify if he or she has been unemployed, is receiving SNAP benefits (see below) or has a service-related disability. The maximum credit is more than $2,400 in many cases.
  • Ex-felons. A qualified ex-felon is a person hired within a year of being convicted of a felony or being released from prison.
    Designated Community Residents (DCRs). The worker must reside in an empowerment zone, enterprise community or renewal community and continue to live there after employment.
  • Vocational rehabilitation referrals. This applies to anyone with a physical or mental disability who has been referred to an employer during or after rehabilitative services under certain programs.
  • Supplemental Nutrition Assistance Program (SNAP) recipients. This covers members of families that received SNAP benefits for the previous six months or at least three of the previous five months.
    Supplemental Security Income (SSI) recipients. A person is a qualified SSI recipient for any month in which he or she received SSI benefits within 60 days of the hiring date.
  • Long-term family assistance recipients. This applies to family members who receive assistance under a Title IV-A program.
  • Long-term unemployment recipients. These individuals have been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during this time.

In addition, a special “summertime credit” of up to $1,200 per worker is available for summer hiring of youths aged 16 or 17 residing in an empowerment zone or enterprise community.

Best of all, there’s no limit on the number of credits your business may claim if workers are properly certified. For instance, if you hire 10 workers who qualify for the $2,400 credit, the total maximum credit is $24,000.

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If you need more information, please contact us so we can connect you with one of our CPA advisors who will be committed to your business and personal success. BLS is here to help!