In doing so, Congress emphasized that the WOTC is a subsidy designed to incentivize the hiring and employment of individuals who are members of targeted groups. Finance leaders should put systems, processes and capabilities in place in order to benefit from WOTC and help ensure compliance with program requirements. In order to claim the tax credit, the applicant and employer must fill out IRS Form 8850 and submit it to the applicable State Workforce Agency within 28 calendar days following an employee’s start date. The first step is screening the applicant for WOTC eligibility and capturing all necessary information from the applicant in order to complete the form, which must be done on or before the date on which any form of job offer is extended to the applicant.

• Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business.
• The DOL reports that employers can earn a tax credit of 25 to 40 percent of the new hire’s applicable wages, with a maximum credit of up to $9,600.
• The WOTC is a proactive hiring credit and is only available for new employees.
• Finance leaders should put systems, processes and capabilities in place in order to benefit from WOTC and help ensure compliance with program requirements.
• Before an employer can hire someone under the WOTC program, the candidate must demonstrate their eligibility by filling out the first page of IRS Form 8850 and returning it to you, either on or before the job offer date.
• Each Form 5884-C determines the cumulative credit the organization is entitled to for all periods.

Should I fill out Work Opportunity Tax Credit (WOTC) survey even if I know it doesn’t apply to me?

This information must be captured on or before the day a job offer is made to the applicant. Doing so during the employee application process creates an opportunity to do so in a way that is consistent and captures the right qualifying information without unnecessary manual effort. Capturing some of this information up front even helps companies to forecast their potential benefit. On or before the day that an offer of employment is made, the employer and the job applicant must complete Form 8850 (Pre-Screening Notice and Certification Request for the wotc adp Work Opportunity Credit).

• ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation.
• For all target groups other than long-term TANF recipients, the credit amound equals 25 percent of their wages if they work at least 120 hours, and up to 40 percent of their wages if they work at least 400 hours during the year, up to the tax credit maximum.
• If an organization is screening out of compliance (i.e., after the date of a job offer) for one of their hires, that likely means they are out of compliance with 100% of their WOTC screens.
• First created by Congress in 1996, the WOTC is a federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment.
• Congress will need to renew the program for it to continue past that point.
• A screening solution that uses plain language and is smart enough to skip past irrelevant sections is helpful.
• For example, let’s say two individuals apply for the same job and they’re both equally qualified to do the job.

Work Opportunity Tax Credit questionnaire

Superior payroll solutions and HR tech designed to help you manage your entire workforce with ease. Answer a few questions, and we’ll help you find the perfect HR and payroll solution. ADP SmartCompliance is a suite of technology solutions backed by ADP’s experts to help you simplify compliance complexity, close technology gaps and minimize business disruptions. With ADP’s tax incentive reporting tools, Cognizant has never missed a deadline for managing strict and complex economic development incentive requirements. ADP’s automated WOTC solution seamlessly integrates with most recruiting and hiring software and applicant tracking systems (ATS).

Taxable employers

Some companies choose to couple WOTC screening at the time the initial job offer is extended but this timing can introduce a risk to compliance. If the applicant waits even one day after receiving the job offer to complete the screening, it becomes invalid, and the credit could be denied. Richardson There is a risk that WOTC credits could be overturned upon audit if the IRS discovers that screening is taking place outside of program guidelines. If an organization is screening out of compliance (i.e., after the date of a job offer) for one of their hires, that likely means they are out of compliance with 100% of their WOTC screens. Screening applicants to determine WOTC program eligibility, submitting the right paperwork and filing for the tax credit are the basic steps involved in taking advantage of the WOTC. Keeping track of employee hours and maintaining records round out the six basic steps in the process.

Work Opportunity Tax Credit certification and screening process

This placement captures the screening question responses up-front removing any doubt of program compliance. Look for a place within the application process where inserting WOTC can be transparent to the overall gathering of information. Additionally, be sure the screening process is consistent for all applicants.

How do employers claim the Work Opportunity Tax Credit?

See the Instructions to Form 3800 (General Business Credit) for more information. For example, let’s say two individuals apply for the same job and they’re both equally qualified to do the job. With all other things being equal, the USDOL encourages the employer to hire the WOTC eligible applicant. By doing so, they’ll not only gain a good employee, they’ll also potentially help that individual get off government assistance and back into a working part of society. More importantly to the IRS, that individual will get back into paying taxes. The government provides an incentive for this partnership in the form of a credit against the company’s federal tax liability.

Integration Details

IRS highlights that WOTC screening must occur “on or before the date a job offer is made.” For additional information about WOTC and a full list of eligible targeted groups, visit the IRS.gov WOTC webpage. As our economy continues to recover, employers around the country are creating new jobs and seeking workers to fill vacant roles. Employers can hire employees from the following targeted groups for WOTC. The WOTC screening should never be coupled with onboarding or Form I-9 compliance since these activities most often take place after the individual has started work making the screening untimely.