We often have companies that ask questions with regards to their eligibility for WOTC and how to run the program. Please see the questions and answers below:
#1 How do I know if my company qualifies for WOTC?
Both For-Profit and Non-Profit companies can qualify for WOTC. The key is that you hire employees and it doesn’t matter whether you hire 1 or 10,000 as there isn’t a limit.
A For-Profit can have employees qualify from all WOTC target groups and the credit can be used to offset your federal tax liability. With a Non-Profit, the credit only applies if you hire from the veteran category. You can use it to offset your payroll taxes.
#2 Which employees qualify for WOTC?
The first thing to note is business owners and their family members do not qualify for WOTC. Only their employees will be eligible.
Employees must be brand new to your organization. If they worked for the organization before whether it was 1 year or 10 years ago, they don’t qualify.
Employees must meet certain target group eligibility to qualify for WOTC. There is no limit on how many people qualify as they fall into one of the 9 categories.
1099 or Independent contractors do NOT qualify for WOTC.
#3 What are the WOTC Categories and credit maximums?
To be eligible for WOTC you must fall into 1 of the 9 categories which are:
- SNAP (food stamps) – $2400
- Short-term TANF – $2400
- Long-term TANF – $9000
- Veterans – $2400 – $9600
- SSI – $2400
- Long Term Unemployed – $2400
- Designated Community Resident – $2400
- Qualified Summer Youth Employee – $1200
- Vocational Rehabilitation Referred – $2400
#4 How do you earn WOTC credit?
The certified employee must work at least 120-hours to begin generating a credit. At that point, you receive 25% of the gross wages paid accruing towards your WOTC credit. Once the employee reaches 400 hours, it increases to 40% of the gross wages paid, dating all the way back to the beginning and will continue until the reach the maximum credit for the category certified.
#5 How long do you have to capture the credit on an employee?
You have 1-year from the employee’s hire date to capture the credit on 8 of the WOTC categories. After the 1-year period is over there isn’t any further opportunity. For the Long-term TANF category you have 2 years from the employee’s hire date.
#6 How many employees can qualify for WOTC?
There is no limit on how many employees you can hire that can qualify for WOTC.
#7 When does your WOTC credit become official to be able to claim?
Your WOTC credit becomes official when your state workforce agency certifies that the employee is indeed belongs to a WOTC category. They provide a certification letter that confirms they have approved. If they do not approve they will issue a denial letter. When the certification letter is received that employee is deemed WOTC certified; however, to generate credit, they still need to meet the hour thresholds. You would then claim the credit accrued at the end of your tax year.
#8 How long do you have to use your WOTC credit?
As a general business credit, WOTC can be carried back 1 year or carried forward up to 20 years.
#9 How do you claim your WOTC credit?
At the end of your tax year, you will need to file the 5884 WOTC tax form to claim your credits. At Arvo we provide that to you as most WOTC vendors do not.
#10 What should you look for in a WOTC vendor?
There are 5 core pillars you should look for in a WOTC vendor:
- Technology to integrate with your screening process either through your ATS, website, or other process to ensure frictionless screening of your candidates.
- State Workforce Agency (SWA) team that works directly with the SWA’s along with challenging denials as well as chases down documentation from other government agencies
- Real-time data and reporting that provides you WOTC information in real time so you can make impactful business decisions that will lead to helping you maximize your WOTC credit potential.
- A dedicated client success specialist that gets to know your WOTC program and business inside and out. They will monitor the core kpi’s to ensure that you are reaching an optimized WOTC program where you are receiving the most credit possible for your account.
- Provide WOTC education to your employees so they understand the role they play and how WOTC works which increase the effectiveness of the execution of the program.
Final Thoughts
While there are more questions that do get asked when exploring WOTC, we wanted to share the most common answers. If you would like to have your specific questions answered please reach out to [email protected] and we will have someone reach out to you immediately.