WOTC Strategy Remains Valuable To Employers

by Jennifer Rohen and Dan Bender
CLA

If your organization takes advantage of the Work Opportunity Tax Credit (WOTC) program (or would like to), you’ll be glad to know that tax reform rules retained the credit as a viable savings strategy; you can claim the credit on qualified candidates who you hire through December 31, 2019. You can continue to design your WOTC-strategic recruiting, hiring and onboarding practices as part of your tax planning for current and future years.

WOTC encourages employers to hire people who typically have difficulty entering the workforce, such as ex-felons and some veterans. (See the full, current list below.) The credit ranges from $2,400 to $9,600 for each qualifying employee.

Revolving Filing Period Now In Effect
To claim the credit, you must submit the required paperwork within 28 days of the qualified new hire’s first day of work. File IRS Forms 8850 and 9061 with the appropriate state workforce agency.

Pool Of Qualified Candidates Expanded
The list of WOTC-eligible new hires now includes long-term unemployment recipients. “Long-term” means a minimum of 27 consecutive weeks without employment, and the candidate must have received unemployment benefits during a portion of that period. Like many of the other qualifying categories, the maximum tax credit for hiring long-term unemployment recipients is 40 percent of the first $6,000 of wages.

All qualified employees are certified by state workforce agencies as members of targeted groups defined under IRC Section 51(d) (1-9). The list includes the following: 

  • Long-term unemployment recipients;
  • Qualified veterans;
  • Ex-felons;
  • Designated community residents;
  • Vocational rehabilitation referrals; 
  • Summer youth employees;
  • Supplemental Nutrition Assistance Program Benefits (SNAP) recipients;
  • Supplemental security insurance recipients; and 
  • Long-term family assistance recipients.

Employers who wish to take advantage of WOTC credits are often deterred by the cumbersome amount of paperwork involved. This barrier to participation can usually be resolved by embedding a few WOTC screening questions into your employee onboarding process. Your tax adviser can help you do that, as well as determine whether the credit applies to your organizational situation. They may also be available to assist with the filing, reporting and preparation of tax forms related to claiming the WOTC credit. iBi

Jennifer E. Rohen is a manager and the WOTC practice leader in CLA’s federal tax solutions practice. She can be reached at (314) 925-4326 or jennifer.rohen@CLAconnect.com. Dan Bender serves the nonprofit industry as BizOps Chief Financial Officer with CLA. He works out of CLA’s Peoria location and can be reached at (309) 495-8841 or dan.bender@CLAconnect.com.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com.

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