September 1, 2023

Getting started with Work Opportunity Tax Credits (WOTC)

Getting started with Work Opportunity Tax Credits (WOTC) can be a beneficial strategy for your business to save on taxes while also promoting diversity and providing employment opportunities to specific target groups. WOTC is a federal program in the United States that offers tax incentives to employers who hire individuals from certain disadvantaged backgrounds. Here’s a TOP TEN step-by-step guide to help you get started using WOTC for your business:

Understand WOTC Eligibility Criteria: Familiarize yourself with the different target groups that qualify for WOTC. These include veterans, individuals receiving Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP) recipients, ex-felons, individuals with disabilities, and more. Each target group has its own eligibility requirements.
Determine Eligible Hires: Identify potential candidates who belong to the eligible target groups. When you’re hiring new employees, consider individuals who meet the criteria for WOTC. You can also consider reviewing your current workforce to see if any existing employees qualify for retroactive credits.
Complete Required Documentation: For each eligible hire, you need to complete the necessary paperwork to qualify for the tax credit. This includes the IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit.” This form requires both the employer and the new employee to provide information about the employee’s background and eligibility.
Submit to the State Workforce Agency (SWA): Submit Form 8850 to your State Workforce Agency (SWA) within 28 days of the employee’s start date. The SWA will evaluate the information and issue a certification if the employee meets the eligibility requirements for WOTC.
Receive Certification: If the SWA determines that the new employee qualifies for WOTC, they will issue a certification known as ETA Form 9061 or ETA Form 9062. You’ll need this certification to claim the tax credit.
Claim the Tax Credit: Include the relevant certification with your business’s tax return when you file your taxes. The amount of the credit varies based on the target group and the number of hours the employee works. The tax credit can significantly reduce your tax liability.
Keep Records: Maintain thorough records of all the documentation related to WOTC. This includes the initial pre-screening form, the SWA certification, and any other relevant paperwork. Keeping accurate records will help you during tax audits and ensure compliance with the program’s requirements.
Monitor Deadlines: Be mindful of deadlines for submitting the required forms. Timeliness is crucial to secure the tax credit. Make sure to adhere to the 28-day window for submitting Form 8850 to the SWA.
Stay Informed: The regulations and eligibility criteria for WOTC can change over time. Stay informed about any updates or changes to the program to ensure you’re taking full advantage of available incentives.
Consult Professionals: If you’re unsure about the WOTC process or how to maximize the benefits, consider seeking advice from tax professionals or consultants who are well-versed in employment tax incentives.

By following these steps and actively participating in the WOTC program, your business can not only reduce its tax liability but also contribute to the economic empowerment of individuals from disadvantaged backgrounds. At Tax Credit Group, we can help your business gain a better understanding of the WOTC available. Give us a call at (563) 583-2115 to get started today, or schedule an appointment with one of our advisors.

The Advantages of Tax Credits for Small Business Owners

Tax season is upon us, and it’s a great time to remind all small business owners to consider working with your tax consultant throughout the year to make sure you’re getting access to all the tax credits available to you.

At Tax Credit Group, we are frequently asked about the value of tax credits for small businesses. Tax credits can be a valuable tool for small businesses that are looking to increase profitability, gain a competitive advantage, and access new markets and customers. The value of tax credits is dependent on each business’s unique circumstances and tax situation.

Knowing the Benefits

The benefits of tax credits for small businesses are numerous. Tax credits can help small businesses increase their profitability by reducing their tax bill. They can also give small businesses a competitive advantage by allowing them to invest in new technologies and equipment. Tax credits can also be used to attract investment and funding, which can help small businesses grow and expand. Finally, tax credits can help small businesses access new markets and customers by enabling them to offer products and services that are in high demand.

Evaluate the Cost

It is important for small business owners to evaluate whether the credit is worth it for their business based on their specific circumstances and tax situation. For example, while some tax credits may provide significant savings, they may also come with significant costs, such as the cost of preparing the necessary documentation and the time and resources required to apply for the credit. Small business owners should carefully consider the costs and benefits of each credit and consult with a tax professional if they are unsure.

Do Your Research

If you are interested in applying for tax credits, there are several steps you can take. First, research the available credits and determine which ones you may be eligible for. The Internal Revenue Service (IRS) provides information on various tax credits and the process of applying for them. The Small Business Administration (SBA) also provides information on tax credits for small businesses and other financial assistance programs. For example, if your business is involved in renewable energy, you can visit the National Renewable Energy Laboratory (NREL) for information on renewable energy tax credits and other incentives for renewable energy.

Make the Next Steps

Small businesses looking to increase profitability, gain a competitive advantage, and expand into new markets and customers may find tax credits to be a valuable resource. By working with a tax credit consultant, such as Tax Credit Group, small business owners can ensure that they are making the most of their eligibility and maximizing the benefits of these valuable credits.