Work Opportunity Tax Credit Extended Through 2020: What This Means for Your Business

Work Opportunity Tax Credit Extended Through 2020: What This Means for Your Business

In today’s economic climate, running a business is no easy feat. Finding qualified employees who can help you grow and who will contribute to your business is difficult enough in addition to making the necessary space on payroll for such an individual. Luckily, the federal government has incentivized hiring certain individuals in a manner that also helps businesses at tax time.

Through the Work Opportunity Tax Credit (WOTC), businesses are able to help lower their tax bill when they make hiring decisions. This helps both the new employees find a job and employers, who can use all the economic relief they can get. Recently, a new law was passed extending the WOTC through December 31, 2020 providing extra time for employers to qualify for the credit.

Who Can I Hire Under the Work Opportunity Tax Credit?

The Work Opportunity Tax Credit is designed to incentivize hiring of various groups of people such as:

  • Qualified veterans
  • Qualified former felons
  • Designated community residents
  • SNAP recipients
  • Supplemental Security Income recipient
  • Long-term family assistance recipient
  • Qualified long-term unemployment recipient

What Is the Amount of the Tax Credit?

The Work Opportunity Tax Credit varies in amount and around $1 billion in these credits are claimed every year, according to the Department of Labor. If the employee works between 120 and 400 hours a year, your business will be eligible for a credit equivalent to 25% of the employee’s wages. If the employee works more than 400 hours a year, your business will be eligible for a credit equivalent to 40% of the employee’s wages. Notably, there are no restrictions on the number of employees you can hire to receive this tax credit.

How Do I Claim the Work Opportunity Tax Credit?

There are two ways to claim the Work Opportunity Tax Credit. Qualified workers can get a conditional certification form from a state or local agency specializing in workforce development and present it to their employer. Then, the employer would use it to fill out a certification request form to obtain the credit. The other way is for the employer to fill out both a certification request form and an individual characteristics information form. No matter which way you choose to request the Work Opportunity Tax Credit, it is important to note that this documentation must be filled out and mailed to your state’s Work Opportunity Tax Credit coordinator within 28 days of the employee’s start date.

Businesses would be wise to consider hiring individuals who fall under this federal tax credit not only for the savings but for the opportunity to help out some among us who may desperately need a job.  Contact MKS&H to learn more about how the WOTC can benefit your business.

 

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MKS&H

MKS&H is committed to providing personalized tax and accounting services while developing a deep understanding of you, your culture, and your business goals. Our full view of financial systems and the people behind them allow us create and evolve the best solution that will help you and your business thrive. The accounting experts and consulting professionals at MKS&H work together to help you achieve the financial results you want.

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