The WOTC is a federal income tax credit for businesses that hire individuals from specified target populations. It’s aimed at encouraging employers to take a chance on people who may need extra help finding and staying at a job. Eligible employees include veterans, youth in summer jobs, members of designated assistance programs, qualified ex-felons, and others.
The program is a three-way partnership: It’s powered by a federal hiring tax credit; the certification process is administered by states, and private employers do the hiring. The WOTC has helped move millions of people into jobs over the years, including in many restaurant companies. It has helped drive up payroll tax revenues, given employers help in training and retaining valued employees, and yielded bottom-line benefits for businesses.
Employers today report that the credit is easier than ever to use. Here are five reasons to look into the WOTC:
- It’s a great time to try it out.
After years of renewing the credit for just a year or two at a time, Congress passed a five-year authorization of the tax credit in 2015. The longer-term authorization, through 2019, gave states confidence to invest in their WOTC systems. Some 30 states have automated at least part of the process, making it easier for businesses to apply for WOTC eligibility determinations for their new hires— a huge improvement over the paper-based, manual process of the past. Businesses in many states can now submit applications electronically and get instant access to WOTC determinations. In Pennsylvania, you can visit http://bit.ly/2PAWOTC for state-specific information. - The program’s scope is wide.
More employees may quality for a WOTC credit than you would think. Eligible individuals include food-stamp recipients, individuals referred through vocational-rehab programs, disabled or unemployed veterans, and millions of others. The credit applies to both full- and part-time employees and is based on the number of hours the employee works. - You’re not on your own.
Many employers work with third-party tax partners and WOTC vendors to manage documentation and file requests for certification. Vendors can integrate the tax-credit process with your other onboarding. If you operate in multiple states, a WOTC expert can help you navigate various state deadlines and submission criteria. Many of these vendors also give your new hires a way to self-identify their potential WOTC eligibility over the phone or online. This can keep the process confidential and respectful for employers who don’t want to be intrusive during the hiring process. Pennsylvania CareerLink offers numerous free services to help employers find and retain talent. See the sidebar on the next page for more information. - Consider the benefits.
Employment tax credits can be an integral part of your overall tax planning strategy. The WOTC can help you reduce your federal income tax liability by between $1,200 and $9,600 per employee, depending on the target group and the number of hours the employee works. Employees generally need to be employed for at least 120 hours. The more hours an employee works, the larger your credit. There’s no limit to the number of eligible employees an employer can claim per year. These general business credits are available to C corporations as well as flow-through entities like partnerships, S corporations, and LLCs. - Hospitality is a natural fit.
Restaurants and hotels are America’s training ground. The nation’s 1 million restaurant and 54,000+ hotel locations are the home of both first jobs and second-chance opportunities for people of every background. With an estimated 20 million employees, the hospitality industry today employs about one in 10 working Americans. For an industry with such a big impact on the American workforce, the WOTC provides valuable assistance to offset some of the costs involved in employing individuals who may need additional training. •
