*Updated – What’s the Deal with the Work Opportunity Tax Credit? (WOTC)
| By Jessica Miller-Merrell | Basics, HR
Update as of December 19, 2015: President Promptly Signs Government Funding and Tax Extenders Legislation – WOTC Survives through 2019.
One of my favorite tax credit programs if there ever was a thing as favorite tax credits is the Work Opportunity Tax Credit or WOTC. Unfortunately, the DOL hasn’t updated their website to discuss some of the recent updates and changes in relation to the WOTC hiatus. You might be wondering what this means.
From the DOL:
The WOTC authorization expired on December 31, 2014, placing WOTC in a “hiatus” period again starting on January 1, 2015. ETA provided procedural guidance to the SWAs and the employer community in Training and Employment Guidance Letter (TEGL) No. 8- 13 regarding requests for certifications submitted to SWAs during the 2014 authorization lapse. Similar to the 2014 hiatus period, and specifically in the 2015 hiatus period, states can accept applications for new employees in the current WOTC target groups hired on or after WOTC Program Guidance January 7, 2015 January 1, 2015, but must postpone final processing of those certification requests pending further Congressional legislative action.
The Work Opportunity Tax Credit is not a new program. It’s a federal tax credit available to employers for hiring individuals from certain target groups. These target groups are explained more below. The status of the WOTC has been a hard one to follow. It was on hiatus, re-enacted and placed on hiatus again which is confusing. I can’t keep up with the on again, off again relationship status. I just wanted to know if there was an active program for the WOTC?
In 2015 the WOTC was again re-enacted retroactively. Businesses had a short window in April 2015 to screen applicants and apply for this credit. States were given the opportunity to process WOTC requests from 2013 and 2014 but not 2015. This makes for a very confusing program, and one that I am certain employers are not taking advantage of because there isn’t any clear communication from any government agencies including the DOL or the IRS.
The WOTC process is already hard to follow like any government tax credit program. It’s why most employers outsource these efforts using a PPO or an unemployment and tax credit claim management company.
What is the Work Opportunity Tax Credit?
Under the Work Opportunity Tax Credit, Employers can hire eligible employees from the following target groups and receive a tax credit
Unemployed Veterans (including disabled veterans)
Temporary Assistance for Needy Families (TANF) Recipients
Food Stamp (SNAP) Recipients
Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
Vocational Rehabilitation Referred Individuals
Ex-Felons
Supplemental Security Income Recipients
Summer Youth Employees (living in Empowerment Zones)
The tax credit itself is equal to 25% or 40% of a new employee’s first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. They DOL has a handy WOTC Calculator to see how much your business can earn in tax credits which would be extremely helpful if employers were able to submit 8850 documents for the WOTC credits for any hires made in 2015.
For Veterans under the VOTC program, the maximum amount of the tax credit (displayed on the right) is as follows but depends on a few factors as outlined below. (data courtesy of the Department of Labor)
| Receives SNAP (food stamps) benefits | $2,400 |
| Entitled to compensation for service-connected disability | |
| Hired one year from leaving service | $4,800 |
| Unemployed at least 6 months | $9,600 |
| Unemployed | |
| At least 4 weeks | $2,400 |
| At least 6 months | $5,600 |
For other WOTC groups as listed in the bullets above, employers can receive the maximum tax credit amount listed on the right.
| Receives SNAP (food stamps) benefits | $2,400 |
| Entitled to compensation for service-connected disability | |
| Hired one year from leaving service | $4,800 |
| Unemployed at least 6 months | $9,600 |
| Unemployed | |
| At least 4 weeks | $2,400 |
| At least 6 months | $5,600 |
The tax incentive has historically been quite beneficial for firms who are employing in these targeted demographics, notably in sectors like retail, hospitality, contact centers, and restaurants. In order to maximize the prospective tax benefit, I personally preferred to utilize the neighborhood one stops and unemployment offices. Unfortunately, there isn’t much guidance on when firms will be able to submit documentation for the tax credit in the future for the years 2015 and 2016.
The WOTC program is crucial, particularly in a market with a skills shortage. Employers aim to cut their costs associated with employment. This would be made possible by a scheme like the Work Opportunity Tax Credit, especially in light of the fact that my top three untapped talent sources for 2016 are veterans and military spouses, ex-felons, and people with disabilities.
In your research , have you calculated the number of hardworking Americans laid off and/or terminated for employers to take advantage of this program? Do not think for one minute they are hiring ADDITIONAL employees!
Hi Annette,
MIght I suggest that you check out the monthly jobs report shared monthly by the BLS. It includes information about companies who have added as well as eliminated jobs. For example, in the January 2017 report, 227,000 non-farm payroll jobs were added in January and the employment held steady at 4.8%.
This was designed to encourage employers to hire workers who had been on government assistance programs and not to churn employees hiring and terminating them. Training new hires, recruiting them and even taking the time to input them into HR system is very expensive and costs more than the WOTC tax credit maximum amount.
Jessica
How does WOTC help older middle aged or senior workers? It seems to stop at age 39 and creates incentives for age discrimination in hiring. Older workers need to be included because they are first laid off/fired and last hired and never hired back at a living wage either.
Hi Angela, WOTC is designed to offer incentives to employers for candidates at least 18 years and older. If you are an employer looking to hire great candidates or someone who is experienced and looking for work, I would suggest working with your local AARP office. They do fabulous work and provide really great programs for both the candidate and employer.
Age was and is always only a number for me. Some of the best candidates I have hired for jobs were retired and over 65. If you are frustrated with your job search or believe that you are being discriminated against, these feelings tend to come through in the job interview. It doesn’t mean you aren’t getting hired because you are older but recruiters often get gut feelings and vibes that the candidate is angry or unhappy.
I would suggest working with a career coach or attending a mock interview as a candidate to get some candid feedback about you, your resume and what type of messages you are sending when you apply.
JMM
This looks to me like a way for employers to screen out people NOT on welfare, food stamps or who are NOT currently unemployed. So if you have managed to keep a job but want/or need a change or chose not to go on assistance and be frugal you may not get hired because you will not afford an employer a Tax Credit!
Hi Rae,
That is not how the WOTC program works at all. There is a small question during the hiring process with an online application that a candidate simply answers yes or no they have received government assistance. As an employer, I don’t see that information. Once I extend an offer to you, the WOTC form normally pops up (if the process is online) and then I ask the potential new hire to complete the form.
If there is no online hiring process or application, a company will ask EVERY candidate during the offer process to complete the WOTC form and then they will push the form through the required process in order to receive the credit.
An employer is rewarded for participating in this program. It’s not being used to discriminate against hiring. Personally, I could care less if you have received government assistance as a recruiter, business owner or hiring manager. I have never used it as a way to filter candidates. What I do care about is if you are excited, enthusiastic to come to work and willing to work hard to do the job I hired you to do. I believe most employers and hiring managers want these things too. I hope as an employee you are looking to do that in order receive compensation for your work.
If you want to talk things through or need help with your job search, shoot me an email (jessica(at)blogging4jobs(dot)com and I’m happy to talk to you by phone. I also have a job search guide that you can download and access for free if you are interested: https://lo127.infusionsoft.com/app/page/job-search-guide.
Best of luck in your career.
JMM
Hi Jessica, my business is trying to hire job seekers with severe learning disabilities. Do you have any information as to what group they may fall in as I would like to take advantage of the WOTC? Thanks!
Hi Greg,
This is fantastic. Those with learning disabilities would qualify for WOTC if they are on a government assistance program and you would receive a tax credit for that.
Here is a list of companies who have programs aimed at hiring those with special needs like autism. I’m sure there is a local non-profit organization near you that would be wiling to help place individuals with you. Often times they have a coach that helps them adjust to the workplace.
http://www.blogging4jobs.com/hr/companies-hiring-adults-with-autism/
I’m happy to talk more about this and help you brainstorm. Email me at jessica(at)blogging4jobs(dot)com.
JMM
Hello, Jessica,
I was recently hired by a hospital that is offering a 5k sign on bonus for nurses. I am a new graduate nurse but the offer that’s posted on indeed and the hospital’s website specifies the requirement “hold a current license or be eligible to sit for licensure as an RN.” I applied for the job, was offered the job and accepted it, I hadn’t sat taken the NCLEX but did about two weeks after being hired. Prior to being hired, I inquired about the 5k bonus being advertised but was told it wasn’t for new graduates and only for experienced nurses. Though the advertised listing for the position mentioned nothing about being a new graduate, in fact stated be eligible to test for licensing. If you’re an experienced nurse, you must have already had your license in order to gain that experience so obviously HR was lying to me. Also, I am a service connected disabled veteran (rated at more than 30%) and I have been unemployed for more than 6 months prior to hiring. This means the for profit hospital will definitely receive the $9,600 WOTC for hiring me. How would you suggest that I go about enforcing their listing for the $5k sign on bonus? Especially considering the agency is going to be receiving the $9,600 WOTC for hiring me. It’s irritating and annoying that HR lied to me about what the advertisement for employment said. Also, I required far less training than other new hires because I trained at that particular hospital.
Any suggestions you have would be greatly appreciated.
Thank you
Hi Mae,
You are describing two separate things: 1) questions about WOTC and 2) help regarding the $5,000 signing bonus.
Regarding 1) WOTC: Not every employee chooses to participate in WOTC and I have no way of knowing if they have or have not. This information is not available to employees or the public so I can’t say either way. I have never in my experience, seen an employee be compensated addition monies because of WOTC. It’s a tax benefit designed for the employer.
2) I would suggest gaining a copy of your employment advertisement where it makes the promise of a $5,000 sign on bonus for nurses. Talk to your HR person directly and file a complaint. If you have already talked to your HR team and are not satisfied with their response, I would suggest to consider talking with HR’s supervisor. Since I don’t have a copy or know your specific state’s employment laws, I am unable to get the full picture. If you are uncomfortable talking to anyone at your employer, you might consider talking to someone who can help you like your EEOC office and speak with someone there.
Once again, I’m not an expert or a lawyer, but I hoped I helped give you some clarity on the situation.
JMM
I forgot to add, that I now have my license to practice as an RN through the state’s board of nursing. Not sure if that might matter for your response but I am a licensed RN.
Does WOTC benefit immigrants
Hi Vivian, Companies that hire immigrations and refugees can receive WOTC benefits so long as the individual receives government assistance in some form as outlined in the article.
Thank you for asking the question.
JMM
Hi, We acquired a convenience store business which had an employee who has some autistic disabilities and can only work 25 hours per week. (according to his dad) This gentlemen is 52 years old. Does this qualify us as the employer WOTC? Any information would be appreciated and helpful. Thank you
Hi Jessica.
I am looking for a new full time job and yesterday I got a call from one of the companies I applied for they told me that they will let me know if I will be elected for a face to face interview then today I got an email from that company saying ” Thank you for continued interest in the position we are offering.. bla bla bla.. As part of the application process, we ask that you complete the questionnaire in order to assess eligibility for the Work Opportunity Taxes Program (WOTC)” the go on with the email then they sent me an attachment and it is a ADP page asking me for personal info like my Social Security and other info, I replied to them that I could not share such a personal info by email . This is the first time I apply for a job and they ask me for my Social Security even before they see me in person… Is this common for companies to do? And why they want to check if I qualify ? I am a little bit confuse with this . Can u please help me clarifying this? Also what can I expect after I complete that questionnaire ? If I decide to do that?
Thank you very much!
Carolina.
Carolina, i notice your answer was not addressed. I myself have never Been asked to complete any such form and i reacted like you did. I wish someone would respond.
Leila