Do you know about Internal Revenue Service Forms 8850, 5584, and 5884C? If not, the odds are that your organization has been missing out on thousands of dollars in tax credit. Each year, employers claim about $1 billion in tax credits under the Work Opportunity Tax Credit (WOTC) program. The great news is that your organization, whether it’s for-profit or non-profit, can be eligible for the WOTC.
Get WOTC-Qualified Groups on Board to Qualify
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire and retain individuals from certain target groups with significant barriers to employment. To be eligible for the WOTC, your company must employ individuals from the following target groups:
- Food stamp recipients
- People with a felony on their record
- Long-term unemployed
- Temporary Assistance for Needy Families recipients
- Vocational Rehabilitation Referrals
- Designated Community Residents
- Supplementary Nutrition Assistance Program recipients
- Supplemental Security Income recipients
- Summer Youth employees (living in empowerment zones)
A great way to pre-screen candidates to see if they are WOTC-eligible is to include page one of the IRS Form 8850 in your job application process. Once the successful candidates join your company, you should review the completed 8850 pre-screening form to determine if the new hires belong to any of the WOTC-eligible target groups.
Complete Minimal Paperwork to Claim WOTC Benefits
As an employer, you make the hiring decision and complete minimal paperwork to apply for the credit. You are required to complete the IRS Form 8850, Prerecorded Notice and Certification Request for the WOTC. You’re also required to file either Form 5584 (for-profit) or Form 5884-C (non-profit). Another form that you should complete is the ETA Form 9061.
After completing and signing these forms, submit them to your local State Workforce Agency (SWA). These forms should be submitted within 28 days of the new hires’ start date. You can then wait for SWA to make the final determination, which will indicate whether the new hires are certified as WOTC-eligible for any of the target groups. After the new hires are certified, you can file for the tax credit with the IRS.
Earn Between $1,200 and $9,600 per Employee
Depending on the new employees’ target group and the number of hours they’ve worked in the first year, you can earn a tax credit of between $1,200 and $9,600 per employee. Your new employees must have worked at your company for over 120 hours in the first year for your company to receive the tax credit. Also, there’s no limit on the number of qualified hires you can claim.
If your new hire is a long-term TANF applicant, you may claim a tax credit equal to 40% of the new employee’s first-year wages, up to the maximum tax credit, if the new employee works over 400 hours. In the second year, you can claim a tax credit equal to 50% of the second-year wages.
If your new hire is classified under other WOTC-eligible target groups, you may claim a tax credit equal to 25% of the employee’s first-year wages, up to the maximum tax credit. If the employee works over 400 hours, you may claim a tax credit equal to 40% of the employee’s first-year wages, up to the maximum tax credit.
Receive Your Tax Credits Hassle-Free with Incentax
To get the maximum tax credits that you deserve without any of the stress involved in the claim process, you’ll need an experienced and dependable expert by your side. Since our founding in 2011, we’ve been offering a diverse range of tax credit opportunities that benefit companies in various fields and industries. We’ve assisted hundreds of companies qualify for federal and state tax credits. Contact us today to find out how we can help your organization.