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

What is a W-4 Form?

What is a W-4 Form?

What is a W-4 Form? W-4 forms are essentially very basic tax returns filled out by employees. Specifically, it tells employers the correct amount of tax to withhold from the employee’s paycheck. Need a W-4 Form? Download it here. Why are W-4s important? The accuracy of an employee’s W-4 submission will determine the size of their tax refund (or bill) at the end of the year. The amount withheld should be as close as possible to their actual tax obligation—a big deficit can be an unwelcome surprise and may be accompanied by further penalties. Withholding more than necessary is considered by some employees as an easy way to save but, while refunds may seem like a nice treat, you are taking away the chance for employees to invest (or use)...

W-2 Employer Responsibilities

W-2 Employer Responsibilities

What is a W-2 Form? W-2 forms are an important part of employees’ tax filings, listing all wages and salary paid along with the amounts withheld for taxes and benefits. W-2 forms include information about your business and employee details along with how much employees earn (including tip income), how much they withhold for tax (as specified on their W-4 form) plus social security and Medicare contributions, also factoring in retirement and special benefits plans. A W-2 form is required for all employees. However, for independent contractors, for whom taxes are not withheld, an employer is required instead to submit a 1099-MISC form, which simply reports payments. (Here’s how to figure out whether someone is an employee or an independent...

Case Study: Price Brothers, Inc.

Case Study: Price Brothers, Inc.

A need for robust reporting tools and a modern HR and payroll platform with onboarding capabilities led Price Brothers, Inc., to Paycor. “We’re constantly hiring and looking for skilled trade help on a daily basis. Now they can fill out the application online and we can email them the new-hire paperwork. They can complete everything online before their first day.” - Kim McLaughlin, CFO, Price Brothers, Inc. Why Price Brothers, Inc., left their payroll provider Price Brothers, a Charlotte, N.C.-based plumbing contractor who specializes in new-home construction, needed a more modern HR and payroll platform that could keep up with their growing business. Their former solution wasn’t intuitive and didn’t collect all the data they needed for...

2020 Small Business Health Insurance Requirements

2020 Small Business Health Insurance Requirements

Small business owners aren’t insurance experts and they shouldn’t have to be. Many businesses are so small that the folks in charge of evaluating benefits packages are sometimes in the dark about the myriad compliance requirements surrounding health insurance coverage. Even though small businesses that employ fewer than 50 full time employees aren’t legally bound to offer health insurance, many of them offer coverage to improve employee engagement and morale and also to attract the best talent. So, if your company plans to provide health insurance for your employees, it’s important that you understand your choices and the laws around them.If you’re looking to offer health insurance in 2020 you should consider adding these five popular...