Hiring a Helping Hand – The Work Opportunity Tax Credit

As a business owner, hiring the right staff requires a thorough vetting process. What if hiring the right staff also makes your business eligible for a tax credit? The federal government offers the Work Opportunity Tax Credit (WOTC) to employers who hire individuals from certain targeted groups of people, such as veterans.

Qualified Targeted Groups

Some of the “targeted groups” eligible for WOTC include:

• Qualified veterans
• Disabled persons referred to employer as part of a vocational rehabilitation program.
• Summer youth employees
• Qualified Supplemental Nutrition Assistance Program (SNAP) recipients
• Qualified Supplemental Security Income recipients
• Long-Term Unemployment Recipients

Each category holds additional requirements, but groups deemed “historically disadvantaged” like the ones mentioned above are eligible for WOTC. In addition, employers must obtain certification from their state’s workforce agency to certify that new hired individual is part of the targeted groups. For example, Californian employers would need to contact their state’s EDD for the certification.

Claiming the Credit

WOTC is claimed on Form 5884. The credit was recently extended through December 31, 2019 through the Protecting Americans from Tax Hikes Act of 2015 (PATH). The tax credit is worth up to 40% of the first $6,000 of each new hire’s first year wages.

Small businesses require owners to wear lots of “hats” in overseeing the daily functions, such as sales and bookkeeping. Having a dedicated team shoulder the accounting side can help owners focused on a primary goal, growing the business. MiklosCPA assists client firms with their accounting and tax needs using our “virtual office” services so that owners can make adept, real-time decisions for their businesses. Reach out to us if you are interested in learning how we can help your business, and follow us on social media for future “good-to-know” write-ups.