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What Is the Work Opportunity Tax Credit (WOTC) and How Does It Benefit Employers?


What Is the WOTC?

The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire and retain individuals from target groups with significant employment barriers (e.g., veterans, ex-felons, etc.). Employers can claim about $9,600 per employee in tax credits per year under the WOTC program. Additionally, there is no set limit to the number of individuals an employer can hire in order to claim the tax credit.

How Does It Work?

 The tax credit employers can claim is dependent on a few factors:

  • The specific target group of the individual hired
  • The wages paid to that individual during his or her first year of employment
  • The number of hours the individual has worked in the first year of employment

There is also a maximum tax credit that can be earned. For specific information regarding this, please click here.

Who Can I Hire?

Employers can hire from the following target groups:

  • Veterans
  • TANF recipients
  • SNAP (food stamp) recipients
  • Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
  • Vocational Rehabilitation Referrals
  • Ex-felons
  • Supplemental Security Income Recipients
  • Summer Youth Employees (living in Empowerment Zones)

For more information about the WOTC target groups, please click here.

The employee groups targeted by WOTC tax credits have had significant barriers to employment. How can you decrease barriers to employment in your hiring practices? Check out our Ten Tips for Making Your Hiring Practices More Accessible.

How Can You Diversify Your Workforce?

Organizations that already employ a diverse workforce are more likely to attract job candidates eligible for WOTC tax credits. If you don’t, we have some resources available to help reimagine your hiring strategy to target a more diverse range of job seekers:

  • Learn more about recruitment’s role in diversity here.
  • The HiringThing Guide to Increasing Your Applicant Traffic is an interactive workbook that can help you complete reaudit and reevaluate your hiring strategy, including increasing your diverse applicant traffic.
  • HR solutions and businesses that have an integrated applicant tracking system (ATS) can more easily eliminate bias in your hiring. Need a primer on what a private label ATS is? We’ve got you covered.

How Are Tax Credits Calculated?

Generally, an employer 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 can earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.

For more information on the maximum tax credits associated with each WOTC target group, please click here.

Given all of the benefits the WOTC program provides for both employers and employees, it’s a program you should consider with your next hire.

WOTC is a great opportunity for those who employ many entry-level hourly positions, like franchises, multi-location businesses, and those in the hospitality industry.

What Does WOTC Do for Employees?

Employees hired under WOTC don’t reap monetary rewards, but if employers are aware of their WOTC eligibility, this could make a job candidate more attractive in the eyes of a prospective employer. This is helpful information to know for staffing agencies or associations looking to place clients and members in new professional opportunities.

How Do I Get Started?

Start maximizing your tax credits by visiting the Department of Labor Employment and Training Administration (DOLETA) or work with a partner to help you navigate the complexities of applying for WOTC. Technology solution providers such as WOTC.com or Walton identify and certify eligible applicants by simplifying the process and streamlining the forms required for certification. If you’re ready to get started, we welcome you to connect with our partners at WOTC.com and start boosting your bottom line today.

About HiringThing
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Author: Alisiana Peters

Alisiana is a senior marketing coordinator at HiringThing, an award-winning online recruiting software provider dedicated to changing the way businesses hire talent. Questions? Contact HiringThing Marketing.