Heard about work opportunity tax credits (WOTC) but not sure how to access them? The truth is, you could be missing out on significant tax credits if you’re not checking new hires for WOTC eligibility.
We put together a webinar with Patrick Cooney from WOTC.com, the leading WOTC tax credit service, to understand the ins and outs of this program. Review our webinar and get the highlights here.
What Is WOTC?
WOTC is a federal tax credit, implemented through each individual state workforce agency. Since the mid-90s, WOTC has been available to businesses that hire certain demographic groups that face significant barriers to employment.
This tax credit exists to encourage diversity within the workforce. The credit amount is based on a portion of whatever wages the relevant worker earns over the course of a year—or in some cases, the first two years.
What Is WOTC.com?
WOTC.com is a tax credit service that has worked with the healthcare industry for many years. Its main purpose is to ensure that employers gain full access to the WOTC tax credit.
WOTC.com integrates directly with Apploi, so Apploi customers can ensure they actually access the credits that they earn.
Who Is Eligible for WOTC?
There are two types of businesses that are eligible for WOTC.
- Any for profit business that pays income tax credit.
- Any business that hires employees via W-2 form (not 1099).
Businesses that only work with contract employees aren’t eligible.
How Are WOTC Credits Applied?
A C-corp, or any corporation that is taxed separately from its owners, will get WOTC tax credits as a corporate tax reduction. An S-corp, or LLC, will get them on the owner’s personal tax returns.
Which Employees Are Eligible for WOTC?
- Qualified IV-A recipients (TANF).
- Qualified veterans, upon a discharge from the service.
- Ex-felons, upon their release from incarceration.
- Designated community residents. This means anyone who lives in an urban renewal zone or a rural empowerment zone, based on residency alone.
- Vocational rehabilitation referrals, or people hired through state-run job placement programs.
- Summer youth employees. Must be 21 or younger.
- Qualified recipients of the supplemental nutrition assistance program (SNAP). This is the largest group for overall eligibility.
- Supplemental security income (SSI) recipients.
- Long term family assistance recipients (Long-Term TANF). Anyone who does not receive TANF aid directly but does reside at the same physical address as the recipient.
- Qualified recipients of long-term unemployment benefits.
All employees must work at least 120 hours to qualify, and 400 hours to fully realize the value of the credit.
How Do You Get Your Credits Through WOTC.com?
First, the new hire must complete IRS form 8850. This form is included with Apploi’s onboarding documentation and will be available to all new hires. Applicants will receive an email from Apploi sending them to WOTC.com to complete the IRS 8850 form. The applicant’s status will be reflected in Apploi: Pending, Applicant Created, Link Sent, Pre-Qualified, or Incomplete. Forms must be submitted to WOTC.com within 28 days of the start date, or the IRS will not accept the application.
A WOTC.com team will review applications and submit them to state agencies. WOTC.com will request backup documentation as needed, and submit to the pertinent state agency. The team will review for clerical errors and omissions, giving the application the best chance of being approved by the IRS. WOTC.com will also review forms for dual eligibility, to ensure employees are categorized for the highest value tax group for which they are eligible. WOTC.com will generate completed IRS forms, which they will then send to the CFO or CPA for filing purposes.
Remember that WOTC tax credits can be carried back one year and carried forward 20 years.
WOTC.com imports employee payroll data and calculates the value of the credits. Payroll data can be submitted by employers via Apploi, annual payroll reports, or through WOTC.com’s online system. WOTC.com then provides you with monthly reports. These reports will update you on the status of applications and tax credits, so you’re always up to date on the state of your tax credits.
Tax Credits With WOTC.com and Apploi
You could be losing thousands on unclaimed tax credits a year. WOTC.com and Apploi are here to make sure that doesn’t happen. With this new partnership, you’ll be able to submit and track your credits on the same platform you use to hire, onboard, and manage. Learn more about Apploi’s integration with WOTC.com by scheduling a demo today.