Don’t mess with taxes

The Work Opportunity Tax Credit (WOTC) program rewards employers who hire and retain disadvantaged job-seekers with tax credits. The amount of credit an employer can claim is calculated as a percentage of wages paid to WOTC-eligible new hires, after the employee reaches certain hours-worked milestones.

Employers in Texas received 7.5% of WOTC certifications in 2022. No matter your industry, business type, or size, the WOTC promises to ease your tax liability and boost your bottom line if smartly integrated into your hiring process.

Which employees in Texas qualify for the WOTC? 

In order to claim WOTC credits, employers in Texas must screen applicants on or before the day on which they extend a job offer. Screening applicants determines whether or not the applicant belongs to a WOTC target group

In 2022, the majority of employees for whom employers gained WOTC certification were eligible for receiving various forms of government assistance, including SNAP, and unemployment benefits. These employees accounted for ~75% of all WOTC certifications in Texas. 

Designated Community Residents accounted for approximately 10% of total WOTC certifications in Texas. The Designated Community Resident target group makes residents of federally-designated Empowerment Zones or Rural Renewal Counties eligible for WOTC. Such areas in Texas include:

    • Futuro Empowerment Zone, which includes parts of Dimmit, Maverick, Uvalde, and Zavala Counties 
    • Rio Grande Valley Empowerment Zone, which includes parts of Cameron, Hidalgo, Starr, and Willacy Counties
    • El Paso County Empowerment Zone, which includes parts of the City of El Paso and the County of El Paso 
    • Rural Renewal Counties, including Andrews, Bailey, Baylor, Borden, Briscoe, Brooks, Castro, Cochran, Coleman, Collingsworth, Cottle, Crane, Culberson, Deaf Smith, Dimmit, Eastland, Fisher, Floyd, Foard, Gray, Hall, Hardeman, Haskell, Hemphill, Hockley, Hutchinson, Kenedy, Kent, Knox, Lamb, Martin, McCulloch, Morris, Nolan, Oldham, Reagan, Reeves, Refugio, Roberts, Scurry, Stonewall, Terrell, Terry, Upton, Ward, Wheeler, Wilbarger, Winkler, Yoakum, and Zavala.

How much WOTC credit can I claim in Texas?

The amount of WOTC credit you can claim depends on a number of factors, including your industry, the number of WOTC-eligible employees you hire, the number of hours those employees work, and the basis of their WOTC certification.

Companies within different industries tend to demonstrate unique hiring behavior, which affects the amount of WOTC credit they can earn. You may estimate the total WOTC credit you can earn within your industry using Arvo’s WOTC calculator. Popular industries for claiming the WOTC in Texas include staffing, trucking, manufacturing, and restaurants. 

The amount of WOTC credit you can claim per eligible employee is capped according to the employee’s basis for eligibility, or target group. A list of maximum allowable credits for the five most commonly certified target groups in Texas in 2022 follows.

  1. Qualified SNAP recipients: $2400
  2. Qualified Long-Term Unemployment Recipient: $2400
  3. Designated Community Resident: $2400
  4. Qualified Ex-Felon: $2400
  5. Qualified Veteran: $9600

Employers can’t control every factor that helps determine the amount of WOTC credit they can claim. One factor they can exercise some control over, however, is the certification rate of their WOTC-eligible new hires. According to the Department of Labor, the State Workforce Agency in Texas issued certification for 22% of WOTC eligibility applications in 2022. Texas businesses who work with Arvo Tech, on the other hand, enjoy certification rates of 42%. 

What is the process of claiming the WOTC in Texas?

You can claim WOTC credits in Texas by following six simple steps.

  1. Determine eligibility
    You must screen applicants to determine eligibility on or before the day on which a job offer is made

  2. Complete certification forms
    Employers request WOTC certification from the appropriate state workforce agency (SWA)

  3. Submit forms to SWA
    Forms must be submitted to your SWA within 28 days of the WOTC-eligible employee’s hire date

  4. Receive documentation
    The SWA will issue documentation substantiating their certification or denial of the employee’s WOTC eligibility

  5. Claim the WOTC
    WOTC credits are claimed on an annual basis along with a business’s tax return

  6. Seek professional help
    Businesses who achieve optimal WOTC benefits often do so with the help of experts like Arvo Tech

How Arvo helps

Ready to claim the WOTC in Texas? Arvo Tech has helped over 135 businesses in Texas navigate the lucrative but complicated world of employment tax credits. Whether you are brand new to WOTC, or seek to optimize your current WOTC participation, our team of tax experts is here to help you boost your bottom line by up to 40%. 

Plus, our seamless integration with major applicant tracking systems and payroll providers make claiming the WOTC in Texas easier than ever. 

Contact us today to get answers or expert support for WOTC.