The Work Opportunity Tax Credit (“WOTC”) is a federal tax incentive program designed to encourage employers to hire individuals from specific target groups who face barriers to employment. The program provides financial benefits to employers who hire individuals from these designated target groups, thereby promoting workforce diversity and economic inclusion.
The WOTC offers a tax credit to employers who hire individuals from groups such as long-term unemployed recipients of public assistance, veterans, ex-felons, designated community residents, vocational rehabilitation referrals, and individuals receiving supplemental security income. The amount of the tax credit varies based on the target group, the number of hours worked by the employee, and the wages paid.
To qualify for the tax credit, employers must follow specific procedures, including obtaining certification for each eligible employee from the state workforce agency. The certification process involves completing the necessary paperwork and submitting it within the required timeframe. Employers can claim the tax credit on their federal income tax return, which can result in significant tax savings for their business.
The Work Opportunity Tax Credit provides a win-win situation for both employers and job seekers. Employers can benefit from reduced tax liabilities while contributing to the economic empowerment of individuals who face challenges in securing employment. It is an effective tool for fostering inclusivity in the workforce and promoting job opportunities for those who need them the most.
