Eye on Hospitality: Work Opportunity Tax Credit – A Win/Win for Employers and Job Seekers

Eye on Hospitality: Work Opportunity Tax Credit – A Win/Win for Employers and Job Seekers https://wahospitality.org/wp-content/uploads/2018/01/TFT-WOTC-raw.jpg

By Paul Schlienz 

WOTC?  

If you’re from the East Coast, you might mistake WOTC for the call letters of a radio or television station, but if you’re a business owner, these are four letters you’ll want to learn about. 

WOTC is the Work Opportunity Tax Credit, a unique anti-poverty hiring incentive that has helped more than 21.5 million people move off public assistance and into the workforce. Since it began, in 1996, as part of welfare reform, WOTC has successfully incentivized employers to hire individuals who may be otherwise disadvantaged in the workforce, saving billions in entitlement spending.

WOTC enables employers to obtain tax credits for hiring individuals who come from certain target groups, including: 

  • Qualified veterans; 
  • Individuals or family members receiving government social services, including TANF, SNAP/food stamps, benefits, etc.; 
  • Residents of designated communities; 
  • Long-term unemployed; 
  • Youths hired for summer jobs in designated communities; and 
  • Ex-felons. 

“It’s a social program that benefits businesses,” said Mike Lancey, owner of Mckenzie Chase Management. “It’s an interesting crossover between helping people get work and helping employers make that as beneficial as possible.” 

The tax credit employers can claim depends upon the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned. 

For the long-term Temporary Assistance for Needy Families (TANF) target group only, the credit is available to employers who hire members of this group for up to a two-year period.  

  • In the first year, the employer may claim a tax credit equal to 40 percent of the first-year wages, up to the maximum tax credit, if the individual works at least 400 hours. 
  • In the second year, the employer may claim a tax credit equal to 50 percent of the second-year wages, up to the maximum tax credit, if the individual works at least 400 hours. 

For all other target groups, the credit is available to employers who hire members of these groups, based on the individual’s hours worked and wages earned in the first year. 

  • If the individual works at least 120 hours, the employer may claim a tax credit equal to 25 percent of the individual’s first year wages, up to the maximum tax credit. 
  • If the individual works at least 400 hours, the employer may claim a tax credit equal to 40 percent of the individual’s first year wages, up to the maximum tax credit. 

 For more information on the WOTC, see the U.S. Department of Labor’s Work Opportunity Tax Credit page. 

 If you have questions about the WOTC or would like help navigating through the application process, contact Mckenzie Chase Mangement or Heartland Hire. 

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