The WOTC is a federal program that provides tax incentives to employers for hiring and retaining individuals who have been determined by the Department of Labor (DOL) to face barriers to hire. With different names, it has been in existence since 1996. The program was most recently renewed through 2027. To claim the credit, an employer must identify a potential hire as being eligible for one of the target groups, on or before the day of the job offer. The credit is open to any tax filing company in the US.
Credit amounts range, based on hours worked and wages paid – tied to specific target groups – from $1,200 to $9,600 per eligible hire. Credits captured can be carried back 1 year and forward 20 years.
Targeted groups for hire under the WOTC currently include:
1. Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients;
2. Qualified veterans (including disabled veterans);
3. Ex-felons;
4. Designated Community Residents (DCRs);
5. Vocational rehabilitation referrals;
6. Supplemental Nutrition Assistance Program (SNAP) recipients;
7. Supplemental Security Income (SSI) recipients;
8. Long-term family assistance recipients; and
9. Qualified long-term unemployment recipients.
10. Seasonal (paid 5/1 – 9/15) employment of youths aged 16 or 17 who reside in an empowerment zone or enterprise community. NOTE: This credit is equal to 40% of the first $3,000 of wages paid per worker.
The paperwork must be filed within 28 days of the employees first day of work. For employers with many employees, there are servicers that integrate with any of the larger, quality payroll servicers; securely transferring payroll info. Servicers typically charge a service fee of 15% of the credit. Servicers have not been interested in servicing small businesses with fewer employees.
The lack of interest by providers prevents small employers from obtaining this credit. Massachusetts has a dedicated Program Coordinator within the MassHire ecosystem. Small business owners who believe they may hire eligible employees should contact MassHire and work with them to register online to harvest this valuable tax credit.