Hiring Incentive Tax Credits (WOTC)
What is WOTC
WOTC stands for the "Work Opportunity Tax Credit" and is not one, but several tax credits, given to employers at a Federal level for hiring qualified employees. Annually, employers claim over $1 billion in tax credits under this program. The tax credit is a direct credit against your federal tax bill.
If you hire 10 new employees per year it is not uncommon for 3 of them to qualify for WOTC "new hire" tax credits averaging $2,400 per qualified new hire. Even for the small business owner credits can easily reach $5,000 annually.
If you are not completing a form 8850 for every new person that you consider for employment, you are not taking advantage of this Tax Credit. If you are our client, the filing of form 8850 is completed along with all the other paperwork and steps necessary to complete the full application process and retrieval of all Work Opportunity Tax Credits available.
What We Do for You
We do all the paperwork by a power of attorney granted to us by you, the Employer. We take the pre-screen information from the potential new hire electronically either in your presence, or in your office on your computer or electronic device during the interview process, or we can send the prospective new hire an email to return to us the pre-screening information. We take care of IRS Form 8850, ETA Forms 9061, 9062, 9175, 9058 and or 9065 as necessary and IRS Form 5884. We only require quarterly payroll reports from the Employer to track work hours by qualified applicants. We do all the heavy lifting.
We work seamlessly with your current Accountant and there is no limit on the number of individuals an employer can hire to qualify to claim the tax credit. Sample Payroll Tax Savings Calculations with WOTC
Using the Right WOTC Service Provider
The benefits of the Tax Credits are only as good as the method employed in processing the application for the tax credit. There is only a 28 day window for submission of Form 8850 to the state workforce agency of the state in which the business is located. To help meet this criteria GMG WOTC Software allows for immediate application onsite at the time of the new hire interview.
Another potential obstacle involves whether the proposed new hire answers the questions with complete candor. GMG's proprietary process will address this issue while maintaining the privacy of the applicant.
The GMG online Client portal allows for a simple interface that any size company can take advantage of to avoid the paperwork, tracking, and submission headache that come with managing the WOTC program on their own.
What are the Benefits of WOTC
WOTC allows employers to claim a credit against their federal income tax liabilities for qualified employees. WOTC can also be used to offset AMT (Alternative Minimum Tax). Employers generally can earn a tax credit equal to 25% or 40% of a new employee’s first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.
The average benefit per employee is $2,400.00 and can be as much as $9,600.00. That means potentially 10 qualified employees could yield a federal income tax credit between $24,000 and $96,000. Additionally, WOTC credits may be carried back one year and carried forward 20 years. Click Here for Illustrated Benefit Amounts
Target groups for benefits include TANF and SNAP recipients, Veterans, the unemployed from 4 weeks to 6 months or more, designated community residents, vocational rehabilitation referrals, ex-felons, service connected disability and summer youth employees. The complete understanding and processing of necessary information can be complex and time consuming and in some cases cause the 28 day deadline to be missed unless handled properly. Click Here for Department of Labor Employer's Guide Our expertise and high quality service makes the complex simple and profitable for your business.
Additional Employee Based Tax Credits
In addition, there are a multitude of State based Job Creation Tax Credits that small and mid-sized companies frequently overlook. Most employers fail to realize the full extent of credits available through a multitude of enactments, at both the federal and state levels including: Manufacturing Payroll Credits, Technical Job Tax Credits, Enterprise Zone Credits, Startup Business Tax Credits, and Small Business Tax Credits. Fortunately there is a service company that has the expertise and capacity to evaluate on a real time basis the status of all your employees, present and prospective, to match them with the Tax Credits available. Click here to evaluate your potential credits.
How We Reduce Your Tax Bill
The following is the process that is implemented for you:
- Job candidates answer a few simple questions using our proprietary software
- You receive instant feedback on potential Local, State, and Federal Tax Incentives
- Upon hire we automatically submit the necessary paperwork for approval
- Once approved we provide the necessary payroll documents to receive the benefit
From our experience the vast majority of companies are either not taking these types of tax incentives at all, or they are taking only a small fraction of what is available. The average credit is $2,400 per new hire. For example, if you hire 100 new employees and 30% qualify for the credit, your tax credit is $2,400 x 30 = $72,000 in tax credits. Credits are a dollar for dollar offset on your tax bill. These credits can be carried back one year and forward 20 years.
Growth Management Group (GMG) provides a seamless proprietary software information capture and processing system to relieve you of the burden and inefficiency in retrieving WOTC tax credits. Our software system will quickly identify those potential new employees who qualify and assure that your tax professional files promptly and accurately for your credit. Our efficient system and fair pricing will increase your HR's productivity and your company's bottom line. Contact Us for No-obligation Consultation
Hiring Incentives History
Hiring Incentives have been a part of our country’s infrastructure since the early 1940’s. At that time most Hiring Incentives were focused on Veterans returning to work after periods of service. There was a dramatic expansion of Hiring Incentives in the late 1990's and throughout the 2000's as "Job Creation" became the focus for Hiring Incentives.
The Work Opportunity Tax Credit (WOTC) was created in 1996 as a part of this change. The focus for Hiring Incentives has been modified, extended and consolidated with existing Hiring Incentives repeatedly since. The credit was scheduled to be eliminated in 2015, but the PATH Act signed in December 2015 reinstated the tax credit and extended it through December 31, 2019.