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Who Qualifies for the Work Opportunity Tax Credit

Who Qualifies for the Work Opportunity Tax Credit?

Have you wondered who qualifies for the work opportunity tax credit (WOTC)? Regarding tax breaks, WOTC is an excellent option for companies and qualifying individuals (employees). It is designed to incentivize your company to recruit persons from certain target groups.

The target group includes those who have continuously experienced employment impediments. It serves as a win-win situation for both firms and individuals. Besides, it benefits employers with tax credits and individuals with expanded work prospects.

The federal government has established the WOTC. It gives your firm a tax credit based on new workers’ salaries from specific target categories. To know who qualifies for the Work Opportunity Tax Credit (WOTC), our best tax consultant Houston experts take you on a journey to explore the details of this specific concern.

Who is Eligible for WOTC?

Companies and employees must fulfill specific conditions to be eligible for the Work Opportunity Tax Credit. Let us break it down:

Employer Eligibility

The criteria for employer’s eligibility is described as follows:

Employer Certification

Before claiming the WOTC, your company must get certification from the state workforce agency (SWA). It confirms that the new worker belongs to one of the target categories eligible for the credit.

This certification typically requires the employee to file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to the SWA within 28 days of starting work.

Employee Retention

Employers must maintain qualifying employees for a specific time to claim the tax credit. The retention term varies based on the target group to which the employee belongs. However, it typically spans between 120 and 400 hours of labor.

Wage Requirements

Employers must also guarantee that the salaries provided to qualified employees fulfill specific requirements to claim the credit. For instance, the credit is calculated as a percentage of the qualified earnings paid to eligible employees during their first year.

Employee Eligibility

The following considerations define an employee’s eligibility for WOTC.

Start Date

Employees must have begun employment before or after the implementation date of the WOTC target group to which they belong. This date varies by target group and may be subject to legislative changes.

Minimum Employment Period

While the minimum employment length necessary to qualify for the credit varies by target group, individuals must usually work a certain number of hours during their first year to fulfill eligibility criteria.

Final Wrap Up

Learning about who qualifies for the work opportunity tax credit is an excellent opportunity for both firms and qualifying individuals. Our tax advisor services help you understand the qualifying requirements – critical for firms intending to take advantage of this incentive and people seeking job possibilities within the stated target categories. By promoting hiring persons from target groups who suffer job hurdles, the WOTC benefits companies through tax credits and encourages economic inclusion and workforce diversity.