The Work Opportunity Tax Credit (WOTC) is a federal credit which allows businesses a tax credit up to 40% of qualified first year wages for certified workers.
- The credit is equal to a percentage of the eligible employees’ wages.
- WOTC encourages employers to hire from specific targeted groups.
- Eligible employees must work at least 120 hours for employer to receive credit.
- Maximum WOTC is generally $2,400 per employee (40% of the first $6,000) over the first year of employment. However, Long-Term Family Assistance Recipients are allowed a maximum credit of $9,000 over a two-year period.
- Eligible employees must complete IRS Form 8850 prior to or upon starting the job.
- Form 8850 must be postmarked within 28 days of the employee’s start date and sent to the state’s Department of Labor for certification.
- WOTC law contains a sunset date which has been amended several times over the life of the program.
- Many states have credits that piggyback on the WOTC.
- This is one of the few credits that will offset the Alternative Minimum Tax (AMT).
For more details about WOTC credits and available resources to help identify eligible employees, complete the below form or contact Doug Mueller, CPA, Michael Devereux II, CPA or Benji Bala, CPA, CIT.
Find out if your company qualifies for the Work Opportunity Tax Credit