What is the Work Opportunity Tax Credit Screening?

Many employers know that there are tax credits aimed at hiring certain types of employees. But they may not realize the full benefit these incentives can bring to their business. What is the Work Opportunity Tax Credit Screening? How much can it really help a company? Is it worth participating?

What is the Work Opportunity Tax Credit Screening?

Since 1996, the federal government has used the Work Opportunity Tax Credit program to reduce the annual tax burden on employers who hire people who often face obstacles in employment.

With the WOTC, the government intends to:

  • Provide veterans with an easier transition to return to the work force after serving in the armed forces or help them find work after experiencing a service-connected disability.
  • Help families living at (or near) the poverty line become more self-sufficient and less dependent on government aid programs.
  • Provide to at-risk youth the opportunity for a better future with a good job.
  • Help the people who have been previously convicted for serious crimes and remove them from a lifestyle that brings them closer to crime.

How big are these incentives?

These tax credits are available to both full-time and part-time new hires and are calculated based on a percentage of wages earned and hours worked..

As of 2016, the maximum new hire tax credit was $9,600. This higher level of incentive would apply to the hiring of a disabled veteran who had been out of work for at least six months in the year prior to the date of hire.

Other groups qualify for different maximum amounts. At the lower end of the scale, a WOTC-certified new hire who works at least 120 hours in the year could qualify the employer to claim 25% of the first year’s salary for a tax credit of up to $1,500.

That’s a lot of money compared to the time it takes to screen job candidates and go through the hiring process.

How can the employer benefit the most from the Work Opportunity Tax Credit?

There is no limit to the number of people an employer can hire to claim these tax credits. But companies must properly screen and process candidates and new hires! Otherwise, they risk losing thousands of dollars in tax savings each year.

Employers often make two mistakes:

  1. They do not analyze the situation and condition of the candidates and/or new employees to see if they meet the certification criteria. They hire employees whose characteristics do not correspond to the requirements to apply for the Work Opportunity Tax Credit.
  2. They do not monitor the process in a timely manner and the 28-day submission deadline is not met.

Employers who want to maximize these tax credits can contact local organizations and agencies that specialize in helping eligible people find jobs. Through these agencies, Employers may increase the number of interviews they conduct with WOTC-qualified candidates.

Follow these tips to get started:

  • Connect with the state employment agency to express your interest in hiring qualified individuals for the Work Opportunity Tax Credit (WOTC).
  • Post vacant positions on the website of the Veterans Employment Center and at job fairs for veterans.
  • Work with community leaders who are focused on helping at-risk youth and disadvantaged families.
  • Contact organizations that work with ex-offenders. These organizations maintain a list of employers that are open to hiring candidates who need a second chance.

Above all, make sure that forms 8850 and 9061 are always part of the incorporation process.. These forms display all qualified new hires allowing you to capture the most Work Opportunity Tax Credit. Contact the state employment agency to find out. what is the WOTC selection and how to make this process as efficient as possible.

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