Tax Credits for Businesses: Who Should Participate in the Work Opportunity Tax Credit?

The short answer is that every company which is hiring employees should participate in the Work Opportunity Tax Credit (“WOTC” – pronounced WOT-see). Often companies with high turnover greatly benefit from this credit, but all hiring companies should consider this opportunity.

What is WOTC?

WOTC is a federal tax credit for businesses hiring and retaining individuals who face significant barriers to employment. These groups of individuals (or target groups) are determined by Congress with the hope that the workers will move from economic dependency to self-sufficiency as they obtain employment and earn a steady income.

What is the benefit?

The benefit can be pretty significant, even for small companies. For example, if a company hires 10 qualified individuals, they are likely to receive between $20,000 and $24,000 of credit. This example is scalable, so if a company has 100 qualified individuals, the anticipated credit would be between $200,000 and $240,000.

The credit is calculated based on the wages and the number of hours an eligible employee works. The following is a list of the target groups along with the maximum credit associated with each:

Target Group

Max Credit

Temporary Assistance to Needy Families (TANF) Recipient
Short-term TANF Recipient

$2,400

Long-term TANF Recipient

$9,000

Veteran Target Groups
SNAP (food stamp) Recipient

$2,400

Disabled and hired within 1 year of leaving service

$4,800

Disabled and unemployed at least 6 months

$9,600

Unemployed at least 4 weeks

$2,400

Unemployed at least 6 months

$5,600

Ex-felon

$2,400

Designated Community Resident

$2,400

Vocational Rehabilitation Referral

$2,400

Summer Youth

$1,200

SNAP (food stamp) Recipient

$2,400

Supplemental Security Income (SSI) Recipient

$2,400

Capturing the Work Opportunity Tax Credit

Although the credit is statutory, there is a time-sensitive application and certification process for each eligible employee. To learn more about WOTC (or other tax credits for businesses) and the process of capturing the credit, please contact Terracina Maxwell at tmaxwell@claruspartners.com or 614-545-9100 x19.

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