Claiming the Work Opportunity Tax Credit

December 29, 2016 - 3 minutes read

As a business owner, is your company taking advantage of income tax credits available to you?

Since it can be overwhelming to research these credits on your own and determine if your company qualifies, this blog addresses one such credit that applies specifically to employers. This credit is called the Work Opportunity Tax Credit.

The Work Opportunity Tax Credit

The purpose of this credit is to provide an incentive for employers to hire employees from certain targeted groups.  These groups consist of individuals who have found it difficult to find consistent employment.  The following qualifications must be met in order for an individual to be considered part of a targeted group:

  1. A Veteran of the Armed Services and unemployed at least 6 months during the past year.
  2. Veteran of the Armed Services receiving Disability Compensation and discharged or released from active duty in the past year.
  3. A Veteran of the Armed Services entitled to Disability Compensation and unemployed for at least 6 months during the past year.
  4. Member of a family who has received Temporary Assistance for Needy Families (TANF) for at least 9 of the past 18 months.
  5. Veteran and member of a family receiving Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) for a 3-month period during the past 15 months.
  6. An individual referred from a state-approved rehabilitation agency, Ticket to Work Program or the Department of Veterans Affairs.
  7. A person convicted of a felony or released from prison after being convicted of a felony.
  8. An individual receiving Supplemental Security Income (SSI) for any month ending during the past 60 days.
  9. Any individual unemployed for at least 27 consecutive weeks and who received unemployment compensation during some or all of that time period.

In order to ensure that the individual is certified under the requirements of the WOTC, there is a process that must be followed to make sure each person hired has passed a pre-screening.  In Tennessee, the agency that handles the certification is the Department of Labor and Workforce Development.

Claiming the Tax Credit 

Several different factors are calculated together to determine the credit that the employer can claim on their tax return. These factors include the type of person hired, the total hours the individual works, wages earned, and the length of time that the person remains employed.  The amount of the Work Opportunity Tax Credit available for employers to claim  will generally be in the range of $1,200 to $9,600 per year as  long as appropriate conditions must be met and documentation is complete.

If you would like further information regarding this issue or any other tax information, please contact Price CPAs. We are always happy to set up a meeting.