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What You Need To Know About The Work Opportunity Tax Credit

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by Stan McClintock/FMS Solutions
[email protected]

This year, Tax Day falls on Monday, April 15. It is a few months away, but that doesn’t mean you can’t begin getting ready. After all, time is money.

A long-term extension of the Work Opportunity Tax Credit (WOTC) was signed into law Dec. 18, 2015, as part of a larger spending bill. In the past several years, Congress would extend the tax credits retroactively to the prior year. Now there is much more certainty for employers moving forward as they try to secure these credits and get target groups like U.S. veterans and the long-term unemployed working.

The new law extends the WOTC through 2019, and retroactively for 2015, giving employers an opportunity to get tax relief for 2015 hires and through the remainder of the decade.

What is the WOTC?

WOTC is a tax credit incentive offered by the government to incent employers to provide jobs to certain target groups, including U.S. veterans.

Which employers should use WOTC?

Any employer who is typically profitable (credits can be carried forward) and who will be hiring employees (note this is being applied retrospectively to hires made back to Jan. 1, 2015).

Any income tax-paying retailer hiring employees should be taking advantage of WOTC. Otherwise, they’re simply throwing away potential tax-relief dollars. Many FMS clients receive tax credits in excess of $100,000 annually. This program works for employees and employers alike.

What are the target groups?

  • Recipients of Temporary Assistance for Needy Families (TANF): A member of a family receiving TANF payments for any nine-month period during the 18 months prior to hire.
  • Veterans receiving SNAP benefits: A veteran who is a member of a family who has received Supplemental Nutrition Assistance Program benefits (formerly known as food stamps) for at least a three-month period during the 15 months prior to hire.
  • Ex-felons: Economically disadvantaged persons who have been convicted of a felony or released from prison in the 12 months prior to hire.
  • Designated community resident: A person aged 18-39 residing in an empowerment zone or rural renewal county.
  • Vocational rehabilitation referrals: Persons who are, or have been, clients of the rehabilitation services commission or the department of veterans’ affairs.
  • Summer youth: High-risk summer youth, ages 16-17, who are hired between May 1 and Sept. 15 and live in a federal enterprise zone or enterprise community.
  • SNAP recipients: Persons age 18-40 who have received or reside in a family that has received SNAP benefits for the previous six-month period or for at least three of the last five months.
  • SSI recipients: Persons who are receiving Supplemental Security Income benefits for any month ending with the 60-day period ending on the hiring date.

How do you participate?

If you hire one or more persons from a target group, you have to complete the corresponding forms (which can be found at doleta.gov/wotc/) and submit them within 28 days of the hire. Employing these persons will be helping your community while also taking big chunks out of your tax liability.

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