The Federal government has extended the period in which businesses that hired individuals who face barriers to employment can submit their requests for tax credits. Under the Work Opportunity Tax Credit (WOTC), employers have until April 30th to submit WOTC certifications for qualifying workers. The government’s objective, through WOTC is “WOTC helps targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers are able to reduce their income tax liability.” Eligible new hires include unemployed veterans, food stamp (TANF) recipients, people residing within Federally designated ‘economically distressed’ areas, ex-felons, teenagers seeking summer jobs, recipients of SSI benefits, and others.
The WOTC Program was meant to be a short-term measure, expiring on December 31st, 2013. However, in December 2014 the WOTC eligibility period was extended to include workers hired between January 1st and December 31st 2014. To claim the tax credit, employers need to file documentations certifying that the individual they hired is a member of a targeted group. Initially, WOTC required that the documentation be filed with the appropriate state employment agency within 28 days of the individual’s hire date. Under the IRS’ notice 2015-13, the credits are now being retrospectively applied, waiving the 28 day limit on filing the details of candidates hired. Employers can now satisfy the certification requirements by filing Form 8850 – Pre-Screening Notice and Certification Request for the Work Opportunity Credit – before the 30th of April even for employees hired from the targeted groups during 2014. The maximum tax credit ranges from $1,200 to $9,600, depending on the employee hired.
So it is time to start the process and put things in place and start enjoying the benefits.
Employers can claim the tax credit as a general business credit against their income tax. Qualified tax-exempt organizations may also claim credits for hiring qualified veterans who began work between 22nd November, 2011, and 1st January, 2014; using Form 5884-C. However, they may not claim the credit for any of the other targeted groups.
While employment is always good news, providing opportunities to sidelined groups offers a definite win-win for all parties. The businesses benefit from having access to loyal and hard-working employees who perform at the top of their game and are keen to prove that they are inferior to none. They will also enjoy a reduction in their tax liabilities. The so-called “unemployables” are given an opportunity to move toward self-sufficiency. The country’s economy enjoys the reduction in the unemployment rate, reduced demands on the welfare system, and new sources of tax revenue.
Staffing firms will also benefit from the WOTC program if they put talent pipelines in place to source and hire WOTC-eligible candidates. The temporary assignments will provide opportunities for those entering the job market to develop skills and build credentials that can be leveraged when seeking new career opportunities.
Only ten days left to file, so use the time wisely!
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