Why the Work Opportunity Tax Credit (WOTC) Could be the Relief Your Business Needs
While most businesses across the country have come to a grinding halt as “stay at home” orders are put into place, there are some essential businesses that are desperate for employees. Grocery stores, delivery businesses and the like are searching for employees and can’t seem to find enough to fill the need.
If you’re one of them, now is the best time to take a look at the Work Opportunity Tax Credit (WOTC). It could open up a whole new pool of potential employees to your business.
What is the Work Opportunity Tax Credit (WOTC)?
As we’ve talked about in previous posts, the Work Opportunity Tax Credit (WOTC) is a credit that’s given to employers who hire employees from certain groups. Groups like veterans, ex-felons, the long-term unemployed and people on food stamps.
One of the best things to know about the WOTC is that it is unlimited. Whether you hire ten workers or one hundred that fall into these specific groups, you’re allowed to take a tax credit for the first year of that person’s employment as long as that person meets the IRS requirements. You can find out more about those exact requirements here.
For people not so savvy about taxes, that’s even better than a tax deduction. A tax credit is a dollar for dollar match. In simple math terms, if you owe $10,000 in taxes and you have $10,000 worth of tax credits, you’re net zero in what you owe.
Why is the WOTC even more beneficial now?
It’s crazy to think, but the WOTC may be even more beneficial to businesses now than it was at the start of 2020. That’s because there are some very interesting things happening on Capitol Hill and it could mean double the benefits for employers.
While the actual wording from the IRS is still being worked out, the WOTC may be able to work in conjunction with the Employee Retention Credit under the CARES Act. The CAREs Act is the $2 trillion bill that was signed into law by the President on March 27, 2020. If the employer can claim both the WOTC and the Employee Retention Credit at the same time, that employer would have multiple tax credits for the same employee.
It’s something we’re keeping a close eye on here at Tax Credit Group.
Why should I hire WOTC employees?
Which leads to the question that many employers ask: if it’s so great, why aren’t more companies taking advantage of the WOTC?
The answer is they don’t know about it.
Major corporations like Boeing and Lockheed Martin are taking advantage of the WOTC. They are two of the leading employers of military veterans (CNBC) and also employ many people with disabilities (Monster.com). Companies like these are making the most of the tax credits because they employ people who understand the intricacies of taxes and tax credits.
It’s the smaller businesses that miss out on tax credits and they shouldn’t be because they need the savings more. Businesses like these need a company like us to help them see the tax credits they’re missing, including the WOTC.
Aside from the tax credit, what’s the benefit of hiring WOTC employees?
Tax credit aside, WOTC employees bring with them other benefits.
We’ve written about the benefits of hiring ex-felons and military veterans in the past. Those are two good reference articles as you look to hire from these key groups. If you’re an employer that’s simply trying to figure out how a role in the military would translate into something beneficial to your company, check out our post on translating military service to the civilian job market.
Conclusion
We here at Tax Credit Group understand that the novel coronavirus has brought about new and frightening situations for small businesses. For some, it means explosive growth as an essential business. For others, it means shutdown and uncertainty.
In both cases, there are bills at the federal and state levels that are designed to help. We’ve created a couple of resources for you as your business moves forward including how to prepare your business for the possibility of coronavirus. There’s also a post that gathers all the key resources for small businesses in one place.
Tax Credit Group is monitoring everything that’s happening at the federal level very closely. As of April 1, 2020, the Families First Coronavirus Response Act and CAREs Act are both up and operating. Reach out to us and we’d be happy to look at what that means for your business. We’ll also look for any state and local help that may be available to you.