What is WOTC?
WOTC is a Federally-funded tax credit program designed to provide an incentive to employers that hire individuals with barriers to employment.
Each year, large and small companies forfeit millions of dollars because they don't take advantage of federal tax credits, particularly welfare-to-work (WtW) and work opportunity tax credits (WOTC). These federal tax credits encourage employers to hire from eight targeted groups of job seekers by reducing employers' federal income tax liability by as much as $9,000 per qualified hire for WtW and $2,400 per qualified hire for WOTC. The incentive is meant to encourage employers to hire individuals who are disadvantaged in one form or another and get them back into the mainstream and earning a paycheck. There is still time for your company to take advantage of these programs too, but first we recommend doing your homework.
Where to Begin
Getting the most from these programs involves managing many challenges meeting deadlines established by law, submitting forms to state agencies, monitoring hours and wages, providing supporting documentation, and computing what can be complex tax credits. If you miss any one of these deadlines you will lose out on the money you had hoped to attain for your company by hiring these workers. Once you understand the complexities associated with the administrative process, it becomes clear that significant resources will be required to correctly implement a program.
Summing It Up
For some companies, WtW and WOTC programs can save them hundreds of thousands per year. Even small employers can see as much as $20,000 to $30,000 in tax credits, which is substantial. Its all relative to the size of your company. If you generate more credits than you can use in a given year, they can be carried forward up to 20 years. Ultimately, you can save a lot of money. In an uncertain economy where job security is always a concern, launching WtW and WOTC programs with an outsource service provider, on a contingent basis, is an excellent opportunity to leverage your benefit to your organization. Many finance and accounting people are focused on running their business and adhering to compliance issues. This is a chance to enhance your value to your employer without adding staff or increasing administrative expenses. It can be a win-win for everyone.
For more information on WOTC, please read our brochure.