In the world of business, finding ways to improve your bottom line is always a top priority. One avenue that often goes overlooked is tapping into tax credits, particularly those related to your workforce. In this blog, we delve into the essential details of Workers Opportunity Tax Credits (WOTC) and how they can benefit employers thanks to an edition of Compliance Corner by Senior HR Consultant, Lisa Bright.

What Exactly is WOTC?

The Workers Opportunity Tax Credit (WOTC) is a federal government program established in 1996 to incentivize employers to hire individuals from specific target groups who have consistently encountered significant employment barriers. The great news for businesses of all sizes is that they are eligible to participate in this program, which is currently approved through December 2025!

By teaming up with WORX Payroll, you can simplify the often complex WOTC process, ensuring that your business takes full advantage of the available incentives.

The Impact of WOTC on Your Business

So, what’s in it for your business when it comes to WOTC?

• WOTC can help reduce your overall operational costs by lowering your federal income tax liability for each qualified hire from a targeted group.
• You can claim the credit for an unlimited number of eligible employees.
• Hiring eligible veterans can even allow tax-exempt employers to receive credit on their share of Social Security tax.
• WOTC enhances diversity within your organization, boosting overall productivity and employee engagement.
• It contributes to Corporate Social Responsibility by assisting targeted workers in achieving economic self-sufficiency.

Who Qualifies for These Tax Credits?

Various groups of individuals can qualify for WOTC, including:

• In 2020, a total of 39,815 individuals in Lubbock county were recipients of SNAP benefits, reflecting a significant portion of the local population relying on this assistance and could. Those receiving food stamps through the Supplemental Nutrition Assistance Program, are eligible for tax credits of up to $2,400 annually!
• Individuals receiving Temporary Assistance for Needy Families (TANF), qualifying for yearly tax credits ranging from $2,400 to $9,000 for long-term assistance recipients.
• Designated Community Residents between the ages of 18-39, residing in Empowerment Zones or Rural Renewal Counties, can earn their employers a tax credit of up to $2,400.
• Ex-felons hired within a year of conviction or release from prison can qualify for $2,400 in tax credits.
• Approximately 13.8% of the population in Amarillo is over the age of 65. Working Individuals over 65, blind, or disabled can qualify for up to $2,400 in tax credits.
• Hiring someone unemployed for at least 27 consecutive weeks (6 months) can earn the employer a tax credit of $2,400.
• 8,647 Veterans were listed as part of Abilene’s population in the most recent Census. That’s great news for employers local to the area – Veterans provide the largest tax credit, totaling $9,600. Eligibility criteria include being out of duty for at least two months and meeting specific conditions such as receiving food stamps, having a disability, experiencing unemployment for at least one month, or receiving unemployment for at least six months in the prior year.
• Individuals in Vocational Rehab Referral Programs or Summer Youth Employment may also qualify for up to $2,400 in tax credits.

The iSolved WOTC feature we here at WORX Payroll utilize simplifies this process by ensuring that new hires complete the WOTC screening. Our dedicated team reviews forms for qualifications and submits them to the appropriate state for certification. We guarantee that when collecting hours/wages quarterly, WOTC credits are processed, providing employers like you with a summary of the credits they’ve earned.

Maximizing Your Earnings

The maximum amount an employer can earn through WOTC is as high as $9,600 per qualifying new hire.

In the first year of employment, individuals working at least 400 hours can earn their employers 40% of $6,000 in paid wages. Employers can claim 25% of wages for individuals working fewer than 400 but more than 120 hours. When hiring certain qualified veterans, employers can earn up to $24,000 in wages.

Asking Questions About WOTC Eligibility

Employers are required to pre-screen and obtain certification through a State Workforce Agency before or on the day of offering employment to any candidate from a targeted group.

It’s essential for employers to gather the necessary information to identify eligible candidates during the hiring process or onboarding. All qualifying questions on Form 8850 comply with federal EEO laws when used correctly and are always voluntary.

To ensure compliance, our onboarding feature allows new hires to complete the questionnaire necessary for determining WOTC tax credit eligibility, obtain electronic signatures, and eliminate the need for paper forms.

The Road to Maximizing WOTC Benefits

To make the most of the WOTC benefits, it’s smart to work with experienced service providers like us, WORX Payroll. We have the technology and expertise to reduce your federal income tax liability and strengthen your financial position.

If you’re looking to optimize your Workers Opportunity Tax Credits and empower your workforce, don’t hesitate to reach out to us today at 806-765-3258 or [email protected]. We’re here to assist you – whether you’re local to Lubbock or in surrounding areas like Abilene and Amarillo – in navigating the complexities of WOTC and ensuring a successful outcome for your organization and employees.