Work Opportunity Tax Credit: A Tutorial for Employers

Work Opportunity Tax Credit: A Tutorial for Employers


What is WOTC? It stands for the Work Opportunity Tax Credit. WOTC is money back for employers who hire good people who face a challenge getting a job. You may be able to get a WOTC tax credit if you hire an unemployed veteran… or someone who has received food stamps… or has received vocational rehabilitation… or who faces other kinds of challenges getting a job. You can get a tax credit of between $1200 and $9600 for each WOTC-eligible hire. Getting the WOTC tax credit means doing some paperwork. But it’s really not that complicated. You apply for WOTC by sending two forms to the Department of Labor in your state government. It’s usually called the State Workforce Agency. If the State Workforce Agency certifies your WOTC application, then you can file with the IRS to claim the tax credit. And that’s it, you have your WOTC! It’s an opportunity for a deserving job candidate, and a tax credit for you. If you think you might want to apply for a Work Opportunity Tax Credit or WOTC (pronounced “watt-see”), The next few minutes will show you how to do it. There are five steps, and we’ll explain them one at a time. As we go, we’ll give you tips, like this. But first, you need to know what types of workers are eligible for WOTC. These include veterans; summer youth employees; ex-felons; members of a family that has received Temporary Assistance for Needy Families or food stamp (SNAP) benefits; certain people with disabilities, who receive SSI benefits or who are getting vocational rehabilitation; and people who live in certain low-income communities. You can find out all the details on eligibility requirements at doleta.gov/wotc. There are some people who don’t qualify: relatives and dependents of the employer who’s hiring, or majority owners of the business. Also, this has to be a new hire – it can’t be a current or former employee, regardless of how long it’s been since the person last worked for you. Step One. This is for pre-screening a job candidate, and filling out IRS Form 8850. Ask the person you want to hire to fill out the first page. Then, you fill out page two. Form 8850 needs to be completed on or before the day the job offer is made. Step Two: You fill out a second form from the U.S. Department of Labor’s Employment Training Administration, or ETA. You or the job applicant will fill out ETA Form 9061. With the 9061, if you can, include documentation that shows how the candidate meets the eligibility requirements for WOTC. The instructions for this documentation are part of Form 9061. Some job candidates may already have a different form, ETA Form 9062. It means that an agency that’s been helping them has conditionally certified them as eligible for WOTC. If your applicant has a 9062, you just complete the employer’s part of the form. Step Three: You’ve already done most of the work. Now you just send the two completed, signed, and dated forms to your State Workforce Agency. Different states have different ways for employers to submit the forms. You can check this website for information for your state: doleta.gov/wotc. This site also lists the WOTC coordinator in your state – a good person to contact if you have questions about WOTC or the application process. You must submit the forms within 28 days after your new employee starts working for you. If you don’t meet this requirement, then your WOTC application will be denied by the state. How can you prevent this from happening? The minute you and your job applicant complete, sign, and date those two forms, send them to your State Workforce Agency. Do not send these forms to the Internal Revenue Service or the U.S. Department of Labor in Washington, DC. Step Four: Your State Workforce Agency will issue you a final determination on your WOTC application. This determination will tell you whether or not your new hire meets the eligibility requirements for WOTC. If the eligibility requirements are met, then the State Workforce Agency will send you a certification. With that certification, you’re home free, because… Step Five is filing and claiming your WOTC tax credit! Most employers file with the IRS using Form 5884. But, if your organization is tax-exempt, and you’re hiring an eligible veteran, then you file Form 5884-C. For more information about filing with the IRS, visit irs.gov. Before you file for WOTC, your new hire must have worked for you for at least 120 hours. And after you claim the credit, don’t forget to keep your records for at least three years. And that’s it! For the price of some paperwork, you’ll have helped a deserving person get a job, you’ll have a good new employee, and you’ll get a tax credit. It’s a great opportunity— and that’s what WOTC is all about. Learn more about the Work Opportunity Tax Credit at doleta.gov/wotc or call 877-872-5627.

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7 thoughts on “Work Opportunity Tax Credit: A Tutorial for Employers”

  • The Found Money Guy says:

    Sure, you can manually check for eligibility, or you can just screen EVERYONE online and let our system figure it out! https://youtu.be/fAhXh_qRlCQ

  • The Found Money Guy says:

    If you're an employer and would like an online way to file for WOTC credits, without shuffling papers, check this out: https://stryde.me/243877

  • We hire a lot of military veterans and literally we never get these wotc credits. This is so over complicated. If they want you to hire veterans then why is there a time limit? Why would you need approval before hiring? Don't you want people to hire veterans as fast as possible? It is absolutely a broken credit. They need to fix this or remove it entirely. It's pretty infuriating that every year we lose thousands in potential credits because this process is a mess.

    I need to wait a month for approval before hiring a good applicant? What kind of disrespectful garbage is that? Our company hires veterans all the time and this Wotc process is completely broken. I'v spoken to other organisations who hire veterans and they have the same problem. If you want us to hire more veterans, remove the time limits, restrictions and waiting periods.

    Oh it's not that hard It's as easy as filling out form 8850, 9061, 9062, 5884 and 3800 and make sure the employee fills out the right parts and you fill out the right parts then submit the forms to the right departments before hiring the applicant, wait for an approval then file with the irs after they have 120 hours and you only have 28 days to do all this otherwise you will be denied. You will never get this credit. There are companies who have popped up that literally do this process for you and take a percentage. It's sickening. Either give companies credits who hire veterans or don't.

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