The Work Opportunity Tax Credit (WOTC) is a federal tax credit designed to incentivize employers to hire individuals from certain target groups facing barriers to employment. Despite its potential benefits, there are several misconceptions surrounding WOTC. In this blog post, we aim to debunk these myths and shed light on the true nature of the WOTC.
Myth 1: WOTC is too complicated to understand and utilize.
Fact: While WOTC may initially seem complex, it can be easily navigated with the help of knowledgeable professionals. Several resources, including WOTC vendors like Arvo, the Internal Revenue Service (IRS) website, and other tax consultants, can provide guidance on the eligibility criteria, application process, and documentation requirements. By seeking appropriate guidance, employers can effectively utilize WOTC.
At Arvo, we strive to make the tax credit process very simple and frictionless for your candidates, employees, and business.
Myth 2: WOTC is only applicable to large corporations.
Fact: WOTC is available to businesses of all sizes. Whether you are a small business owner or part of a larger organization, you can take advantage of this tax credit. In fact, smaller businesses can often benefit more from the WOTC, as the credit can significantly offset their hiring costs and boost their bottom line.
According to the Department of Labor an estimated $64 billion dollars go unclaimed each year and the majority is by small to mid-size businesses. If this is you, reach out to Arvo now and we can help you begin capturing credits today.
Myth 3: WOTC is limited to hiring specific categories of individuals.
Fact: While WOTC does target specific groups facing employment barriers, it is not as restrictive as some believe. The eligible target groups include veterans, individuals receiving government assistance, ex-felons, long-term unemployed individuals, vocational rehabilitation referrals, and then individuals who live in certain areas of the country. The diversity of eligible groups ensures that many individuals can qualify for the credit, widening the scope for employers to benefit.
Arvo can help you identify WOTC eligible candidates in real time so hiring decisions can be made instantly. We can also help you identify zones around the country you can recruit from as well as provide strategy to recruit more WOTC eligible workers.
Myth 4: WOTC requires significant paperwork and record-keeping.
Fact: While it is true that proper documentation is crucial for claiming WOTC, the process does not have to be overly burdensome. Employers are required to complete IRS Form 8850 and submit it to their respective state workforce agencies within a specific timeframe. By maintaining organized records and collaborating with tax professionals, employers can streamline the paperwork and ensure compliance with the WOTC requirements.
At Arvo, we can take this completely off your plate as we have a seamless process to have everything completed electronically in a quick and efficient manner.
Myth 5: WOTC is not worth the effort due to limited financial benefits.
Fact: The financial benefits of WOTC should not be underestimated. The tax credit can range from $1,200 to $9,600 per eligible employee, depending on factors such as their target group and hours worked. For businesses with a substantial number of eligible hires, the credit can result in significant tax savings. It is essential to consider the long-term financial impact and potential return on investment when evaluating WOTC.
With Arvo, we can help you not only capture the credit but also teach you how to optimize your WOTC program so you are generating maximum credits. It’s also a credit that can be carried forward for up to 20 years.
The Work Opportunity Tax Credit is a valuable resource for employers seeking to expand their workforce while benefiting from financial incentives. By debunking these myths, we hope to encourage employers of all sizes to explore the opportunities presented by WOTC. With the right knowledge, proper guidance, and a commitment to compliance, businesses can take full advantage of WOTC and contribute to a more inclusive and diverse workforce while enjoying the associated tax benefits.