Hiring Tax Incentives
woman-getting-tax-break

Hiring Tax Incentives

Businesses have many tax breaks available to them that are designed to reduce their frequently heavy tax liability. One such credit is the Work Opportunity Tax Credit (WOTC). This credit enables companies to receive tax credits for hiring employees that either live in certain locations or are part of a target group of individuals. Hiring tax credits can have a dramatic impact on a company’s federal tax liability, so much so that one organization can earn up to $9,600 per employee hired through WOTC.

How Does the WOTC Work?

WOTC was created to help certain employees move from economic dependency on various types of government assistance into self-support as they progress into earning a steady income and become contributing taxpayers. At the same time, participating employers can reduce their income tax liability.

Eligibility for Work Opportunity Tax Credit is based on an employer’s hiring from specific groups that often face significant obstacles to employment. The amount credit employers can claim varies and depends upon which target groups are hired, the wages paid to those individuals in the first year of employment, and the number of hours the employees worked. Following is a brief synopsis of the credits available in the WOTC program:

Targeted Groups:

  • Temporary Assistance for Needy Families (TANF) Recipients
  • Ex-Felons
  • SNAP (Food Stamp) Recipients
  • Designated Community Residents (Living in federal and/or renewal communities)
  • Long-Term Unemployed
  • Vocational Rehabilitation Referral
  • Supplemental Security Income Recipients
  • Summer Youth Employee (Living in Empowerment Zones)

Maximum Credit Available:

  • Receives SNAP (food stamps) $2,400
  • Veteran Eligibility based on disability:
    • Hired one year from leaving service $4,800
    • Unemployed at least 6 months $9,600
  • Unemployed Veterans
    • At least 4 weeks $2,400
    • At least 6 months $5,600
  • All other WOTC Target Groups $2,400-$9,000

To be eligible to receive credit for the long-term Temporary Assistance for Needy Families (TANF) target group, an employer must hire a member of this group for up to a two-year period.

  • If the employee works a minimum of 400 hours in their first year, an employer is eligible to receive a tax credit equal to 40% of the first-year wages, up to the maximum tax credit.

  • If the employee works a minimum of 400 hours in their second year of employment, an employer is eligible to receive a tax credit equal to 50% of the second-year wages, up to the maximum tax credit.

If an employer hires an individual from any other target group, a credit is available based on the number of hours the employee works and the total wages earned during the first year of employment.

  • For any individual that works a minimum of 120 hours, the employer can choose to claim a tax credit equal to 25% of the individual’s first year wages, up to the maximum tax credit.

  • For any individual that works a minimum of 400 hours, the employer can choose to claim a tax credit equal to 40% of the individual’s first year wages, up to the maximum tax credit. Many other programs exist at the state and local level that require redundant information.

Let Paycor and HIREtech Help

Don’t be overwhelmed by the WOTC program, and certainly don’t miss out on your tax credit opportunities. Paycor and HIREtech have established an automated payroll feed that makes implementing a tax credit solution simple. Paycor can send all the information necessary to start claiming credits directly to HIREtech. The HIREtech software platform can easily integrate most state programs in conjunction with your WOTC screening to maximize your tax credits. Get in touch today to see how we can help.

More to Discover

Payroll for Restaurants

Payroll for Restaurants

When you’re a small business owner running a full-service restaurant, you can’t afford to make financial missteps. It’s especially important for small businesses to keep an eye on their labor costs. As all restaurant owners well know, restaurant industry payroll is highly complex making it more prone to errors. Not only do you have to figure out wages for your tipped employees, but you also have the added complication of figuring out shortfalls and calculating your FICA tip credit. That’s a lot of computing—and a lot to potentially mess up. State Minimum Wage Laws States’ minimum wage requirements vary, but federal law dictates that if you operate in a state that uses the Federal Labor Standards Act (FLSA) federal minimum wage, your...

BUILD Web Summit - Build a Competitive Compensation Plan

BUILD Web Summit - Build a Competitive Compensation Plan

Learn how to build a compensation plan that keeps you in line with the market and maintains compliance. Speaker: Christine Ippolito Christine Ippolito, SPHR, SHRM-SCP is the Founder and Principal of Compass Workforce Solutions, LLC, a consulting firm providing strategic human resource expertise to small businesses to reduce exposure and increase profitability. She has served clients in a leadership capacity for 25 years in multiple industries and environments within Fortune 250, venture capital and equity-backed companies, as well as privately held and family-owned businesses.

Industry Spotlight - Restaurants: FLSA Compliance

Industry Spotlight - Restaurants: FLSA Compliance

The headlines recently reflect many of the concerns over how restaurants pay its employees. The federal wage and hour law addresses non-exempt, tipped, and exempt employees. This webinar will sort through those definitions and clarify a restaurateur’s compensation plan options. Join Julie Pugh, a partner with the law firm of Graydon in Cincinnati, Ohio, as she discuss what has changed, what hasn’t, and some of the biggest mistakes that can be made when paying restaurant employees. Speaker: Julie Pugh Julie’s practice at Graydon Law focuses on client counseling, employment litigation, and dispute resolution. She routinely represents clients before the EEOC, OCRC, DOL, and federal and state judges. She also worked as a human resource...

Case Study: Diaz Foods

Case Study: Diaz Foods

After receiving tax notices and little support from their HR & payroll provider, Diaz Foods made the switch to Paycor and couldn’t be happier. Not only is the HR department more efficient, but employees have more access and visibility to benefits and HR data than ever before. Discover how Paycor provided the right technology and reliable service Diaz Foods needed to create a better experience for their people.