WOTC Program: What You Need to Know

Many companies are not aware that they may be eligible for tax credits. One of the most common tax credits for businesses is the Work Opportunity Tax Credit or WOTC. The Work Opportunity Tax Credit is a federal tax credit for employers that hire people from “specific targeted groups” who have experienced barriers to employment. 

Retroactively Reauthorized WOTC Hiring Credits

On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), extending and modifying the WOTC Program and the Empowerment Zones. In summary, the PATH Act retroactively reauthorizes the WOTC program target groups for a five-year period, from December 31, 2014, to December 31, 2019. 

The Consolidated Appropriation Act of 2021 authorized the extension of the Work Opportunity Tax Credit (WOTC) until December 31, 2025. The act is still in force.

WOTC Eligibility

Any employer who hires individuals from specified target groups is eligible to receive WOTC tax credits. The target groups are:

1. Veterans
2. Designated Community Resident
3. SNAP (Food Stamp) Recipients
4. Vocational Rehabilitation Referral
5. Ex-felons
6. Supplemental Security Income Recipients
7. Summer Youth Employee (living in Empowerment Zones)
8. Long-Term Family Assistance Recipient
9. Qualified Long-Term Unemployment Recipient

WOTC Credit Calculation

The tax credit amount that employers receive depends on their eligible employees’ wages and hours worked. For most target groups, the WOTC credit calculations are:

1. For eligible employees that work at least 120 hours a year, 25% of the employee’s first-year wages (up to the maximum credit)
2. For eligible employees that work at least 400 hours a year, 40% of the employee’s first year wages (up to the maximum credit)

WOTC Employee and Credit Limits

Employers receive an estimated $1 billion in tax credits each year under the WOTC program. There is no limit to the number of employees an employer can hire to qualify for this tax credit. An employer can receive maximum credit between $1,200 and $9,600, depending on their employees.

Get WOTC Help and More with Proliant

At Proliant, we pride ourselves on our WOTC expertise, helping our clients find all tax credits available to them, including the Employee Retention Tax Credit (ERTC) and the Work Opportunity Tax Credit (WOTC). 

Of course, we do much more than help with tax credits. Through our Payroll Tax Services, Proliant’s Certified Payroll Professionals (CPP) set up complex payroll tax rules and easily calculate tax withholding requirements across multiple locations. Proliant also has built-in safeguards to guarantee you stay compliant, including our audit system that identifies issues before they become problems. 

To learn more about how Proliant can help your business with tax credits and other complex payroll tax rules, schedule a demonstration today.