Tax credits are a type of tax incentive that can reduce a company's tax bill on a dollar-for-dollar basis. One such tax credit that businesses can take advantage of is the Work Opportunity Tax Credit (WOTC) program. The WOTC is a federal tax credit available to employers who hire individuals from certain target groups who have consistently faced significant barriers to employment.

The WOTC program is designed to incentivize businesses to hire individuals from certain designated groups. These groups include Supplemental Security Income (SSI) recipients, individuals from households that receive Food Stamp/SNAP (Supplemental Nutrition Assistance Program) recipients (aged 18 - 39), individuals from households that receive Temporary Assistance for Needy Families/TANF benefits, veterans, justice-involved individuals (felons) hired within one year of conviction and/or release, vocational rehabilitation employment network referrals, individuals who are in a period of unemployment that is at least 27 consecutive weeks and for all or part of that period have received unemployment compensation, Ticket To Work employment network referrals, and individuals age 18 - 39 who live in designated areas (Renewal Community Zone, Empowerment Zones or Rural Renewal Counties).

How the WOTC Program Works

Businesses can earn tax credits up to 40% of the new hire’s first 12 months' wages (up to the first $6,000 in wages). In the case of qualified long-term TANF recipients, businesses can claim up to $9,000 over the course of two years if the qualified individual remains in their employ for two full consecutive years. The credit amount can range from $1,200 to $9,600 depending on the target group of the new hire.

To claim the WOTC, employers must apply for and receive a certification verifying the new hire is a member of a targeted group. After the required certification is secured, taxable employers claim the WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes.

The Role of US Tax Works 2.0

US Tax Works 2.0 is a company that helps businesses maximize their tax credit potential, including the WOTC. They provide a free analysis for businesses to determine their WOTC potential and work with clients to maximize their Work Opportunity Tax Credits.

US Tax Works 2.0 takes care of the complex tax credit system, ensuring businesses don't pay taxes they don't owe and take full advantage of the tax credits available. This can help businesses increase their cash flow, improve margins, and enhance sustainability.

The Benefits of the WOTC Program

The WOTC program not only provides financial benefits to businesses but also helps expand the hiring pool. It encourages businesses to hire from groups they may not have previously considered, thus promoting diversity and inclusivity in the workplace.

Moreover, the WOTC program can be an effective tool in retaining valued employees or in new recruitment opportunities. There is no restriction on the number of new hires who can qualify a business for the tax savings, meaning the more eligible employees a business hires, the more tax credits it can claim.

The WOTC program is a valuable tool for businesses to reduce their tax liability while contributing to social good by hiring individuals from marginalized groups. US Tax Works 2.0 can assist businesses in navigating this complex process and maximizing their tax credit potential.