Yes, tax season is in full swing, but there is still time for companies to recover some significant tax savings for 2015. The Work Opportunity Tax Credit (WOTC) was temporarily shuttered, but now Congress has given it new life, and has even allowed these hefty tax credits to be used retroactively.
WOTC is a federal hiring incentive program that encourages companies to hire people from several target groups that tend to face barriers to employment. These groups include select veterans, those on food stamp and various other government assistance programs, just to name just a few. A company that hires and retains WOTC qualified individuals can earn up to $9,600 in tax credits per eligible employee.
In order for companies to participate in the program, employees must be screened for WOTC eligibility on, or before the day of the job offer, and a Form 8850 must be filed with the State Workforce Agency (SWA) no later than 28 days from the first day of employment.This is not a simple program… but it can bring significant savings. Considering the tight deadlines, screening guidelines, and the legislative contingency of the WOTC program, companies might find it too time-consuming or cumbersome to participate, or they might not make the effort to screen all new hires. The program has also been on a hiatus, which means you may have hired qualifying candidates over the last year without being able to reap the rewards.
The WOTC Program was recently reauthorized by the Consolidated Appropriations Act of 2016 and the Protecting Americans from Tax Hikes Act of 2015 (Public Law No: 114-113) with a retroactive effective date of January 1, 2015 through December 31, 2019.
Following the last two retroactive renewals, the IRS has issued a “Transitional Relief” window of time to allow businesses to retroactively screen and pursue WOTC for employees that were not screened during the time the program was on hiatus.
The retroactive screening process usually involves two components:
- The 28-day deadline for submitting IRS form 8850 for qualifying employees is extended, AND
- The statement signed by qualified employees indicating that they have provided the information on Form 8850 “on or before the date of the job offer” is waived for employees hired during the hiatus period; in this case from 1/1/2015 through 12/31/2015 for all target groups, except the newly added long-term unemployed.
WOTC Transition Relief is a short-term opportunity only, and it is in your best interest to have a partner to help you get the most from administering WOTC.
EBI is partnering with Walton Management Services to present a webinar on this valuable program. Walton is a proven leader with over 35 years of tax credit expertise realizing and maximizing WOTC for companies across all industries. We hope you’ll join us for this very informative webinar on March 24th.