WORK OPPORTUNITY TAX CREDIT PROGRAM

INDEX

WHAT IS THE WORK OPPORTUNITY TAX CREDIT?

work opportunity tax creditThe Work Opportunity Tax Credit is a federal program initiated by the US government to incentivize more job opportunities for groups that could have difficulties being employed. One of the target groups for this program is US veterans. Companies and non-profit organizations that employ from the target groups (WOTC veterans) can receive a tax credit of up to $9,600 per each new qualified hire. The exact amount of tax credit a company can receive is calculated based on the yearly wages of the employees, the hours worked and the WOTC category the veteran belongs to. Many tax dollars can be lost if you do not screen new employees for the Work Opportunity Tax Credit. Read about the WOTC categories, as well as the tax credit amounts and how to calculate them. If you prefer, you can watch the video instead.

QUALIFIED WOTC VETERANS AND TAX CREDIT AMOUNTS

qualified WOTC veteransCertain criteria have to be met for a veteran to be considered as qualified for the WOTC program. These criteria include whether the veteran has a service-connected disability, for how long the veteran has been unemployed after being discharged from the military, or if the veteran is a member of a family receiving food stamps when hired. The veteran needs to match one of the following conditions to be considered as qualified for the WOTC program. Below, you can see the maximum credit amounts for each group.

  • Unemployed for a total period of at least 4 weeks (whether or not consecutive), but less than 6 months in the one-year period ending on the hiring date. Tax credit amount: $2,400
  • Unemployed for a total period of at least 6 months (whether or not consecutive) in the one-year period ending on the hiring date. Tax credit amount: $5,600
  • A disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces. Tax credit amount: $4,800
  • A disabled veteran entitled to compensation for a service-connected disability who is unemployed for a total period of at least six months (whether or not consecutive) in the one-year period ending on the hiring date. Tax credit amount: $9,600
  • A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least 3 months during the first 15 months of employment.Tax credit amount: $2,400

 

The source for the above WOTC categories can be found at the IRS. If your candidate does not qualify for any of the above WOTC veteran categories, there are more target groups the veteran can be eligible to. When a veteran pre-screens their WOTC status with us and does not qualify for any WOTC veteran target group, we always run their profile in our system to see if the individual qualifies for other target groups. Apart from the tax benefits that companies can receive, there are many more reasons why to hire veterans.

HOW TO CALCULATE THE TAX CREDIT

tax credit calculationTo calculate the WOTC tax credit, you need to consider the employee’s yearly wage, the hours worked and which targeted group the veteran belongs to. Companies and non-profit organizations can earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. There is no restriction on how many times an employer can claim the WOTC for new employees each year. When successfully hiring from the WOTC veteran target group, your company´s tax liability can benefit enormously. There are many tax dollars to be saved thanks to this program. Of course, the amount your company saves depends directly on the hiring needs. For example, if your company is hiring a total of 10 new WOTC qualified veterans and the average tax credit amount for each new hire is $4,700, the tax credit your company gets is $47,000.

WE ENCOURAGE VETERANS TO PRE-SCREEN

Pre-screen veteransWhen advertising your company’s vacancies on Veteran Career Center, many of our veteran job seekers have already been pre-screened for the Work Opportunity Tax Credit program. This means that when a candidate is applying for the vacancy you published, you can see if the veteran is already qualified and which WOTC target group the veteran belongs to. If the job seeker is applying for a position and has not yet completed the pre-screening process, you can ask the candidate to do it through our system or the IRS. If the candidate has any questions regarding the process, we would be glad to assist.