What is Work Opportunity Tax Credit (WOTC), Should you apply for WOTC?

WOTC which stands for work opportunity tax credit is a federal tax credit that is available to all the employers who retain and hire qualified veterans and other individuals from certain groups that have historically faced employment barriers. By creating economic opportunities, this program also helps lessen the burden on other government assistance programs.

The WOTC (work opportunity tax credit) is jointly administered through the Internal Revenue Service (IRS) by the U.S. Treasury and the Department of Labor (DOL). The Internal Revenue Service (IRS) is responsible for claiming the credit by managing tax-related requirements while the Department of Labor (DOL) grants policy guidance and funding to state agencies that look after the certification process for work opportunity tax credit.

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Types of employees eligible for Work Opportunity Tax Credit

An employer can only take the advantage of the Work Opportunity Tax Credit if they hire employees from certain targeted groups such as:

Individuals who receive temporary assistance for needy families (TANF) benefits under Part A, Title IV of the Social Security Act
Qualified veterans, including those receiving supplemental nutrition assistance program (SNAP) benefits, those who are unemployed, and those who are unemployed and entitled to compensation from a service-connected disability
Qualified ex-felons
Designated community residents who are at least 18 and under 40 and live in an empowerment zone, enterprise community, or renewal community
Individuals with physical or mental disabilities who have been referred for work after completing rehabilitative services
Summer youth employees
Supplemental nutrition assistance program (SNAP) recipients
Supplemental Security Income (SSI) recipients
Long-term family assistance recipients
Qualified long-term unemployment recipients

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Which businesses are eligible for the Work Opportunity Tax Credit?

Any business, irrespective of the industry and size is eligible for the Work Opportunity Tax Credit under the program. And there is also no limit for the number of employees a business can hire for being eligible for the Work Opportunity Tax Credit program. And apart from all this, there is no cap set for the amount of credits that can be claimed by the business under the Work Opportunity Tax Credit program.

How can we calculate WOTC?

The amount of the WOTC is calculated as a percentage of qualified wages paid to an eligible worker during the eligible employee’s first year of employment. An employer may claim a credit equal to 40% of the eligible employee’s qualified wages if the eligible worker works at least 400 hours during the first year of employment. If the eligible employee works fewer than 400 hours but at least 120 hours, the employer may claim a credit equal to 25% of the eligible employee’s wages. If the eligible employee works fewer than 120 hours, an employer may not claim the WOTC.

Read How to claim the Work Opportunity Tax Credit for an Employee
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How can Nskt global help?

NSKT Global is one of the top consulting firms which provides services of Work Opportunity Tax Credit. We at NSKT Global help in clearing the screening for the WOTC and improving compliance rate and simply data collection. We help save time and reduce the stress of the client who wishes to apply for the WOTC. We also offer benchmarking and analytics tools that can help employers forecast their tax credits.

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This release was published on openPR.