Are you hiring? Have you considered the Work Opportunity Tax Credit? Don’t go it alone, call us.
A lot of businesses are hiring right now and it pays to consider the Work Opportunity Tax Credit (WOTC). The credit has been extended through 2026 and employers shouldn’t overlook this credit. There are strict certification requirements established by the IRS but we can help you navigate through those requirements.
Generally, the credit equals 40 percent of up to $6,000 of a qualified employee’s first-year wages, for a maximum credit of $2,400 per worker. But the WOTC is higher for certain categories.
The credit is available for hiring workers from one of these target groups:
- Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients. These individuals are part of a family receiving assistance from a state plan approved under Part A of Title IV of the Social Security Act relating to TANF.
- Qualified veterans (including disabled veterans). The veteran must be unemployed for at least four weeks, but less than six months in the one-year period ending on the hiring date.
- 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 someone with a physical or mental disability that has been referred to the employer during or after rehabilitative services under certain programs.
- Supplemental Nutrition Assistance Program (SNAP) recipients. This covers members of a family 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 that receive assistance under a Title IV-A program. Qualified long-term unemployment recipients. A qualified long-term unemployment recipient is someone who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during this time.
Also a business may qualify for a special credit for hiring youths aged 16 or 17 residing in an empowerment zone or enterprise community during the summer. This credit equals 40 percent for the first $3,000 of wages paid between May 1 and September 15, up to a maximum of $1,200 for each qualified worker.
This credit can be significant and it is worth a conversation about how to tackle the paperwork. Let us know if you are interested in more information for your business.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.