Learn the six most important steps to claiming the WOTC.
It’s nearly tax day and while it may not be the most anticipated day of the year for businesses, it’s a good reminder to take a look at how you can save more money next year.
The Work Opportunity Tax Credit or WOTC program offers significant tax benefits for employers who hire disadvantaged job seekers. Learning how to effectively comply with all requirements for WOTC takes some practice. However, this step-by-step guide will walk you through the six most important steps for claiming the WOTC.
Step 1: Determine Eligibility
The first step in claiming WOTC is to assess your eligibility. To be eligible, you must hire employees from specific target groups, including veterans, TANF recipients, ex-felons, SSI recipients and more. Familiarize yourself with the IRS guidelines to determine if your new hires are eligible for the WOTC. You can also consult with your tax advisor or a WOTC service provider to ensure you meet the eligibility criteria.
Step 2: Obtain Certification
If your new hires are from WOTC target groups, the next step is to obtain certification for each eligible employee. This involves completing the necessary forms, such as Form 8850 and ETA Form 9061. These forms collect information about employees and their eligibility for the WOTC program. Take the time to accurately fill out these forms, as they play a crucial role in the certification process.
Step 3: Submit Forms to Appropriate Agencies
Once the forms are complete, submit them to the relevant agencies within the specified timeframe. Typically, this involves the state workforce agency or the designated agency responsible for administering the WOTC program in your location. Adhering to the submission deadlines is essential to ensure your eligibility for the tax credit. Double-check that you’ve included all the required documentation and signatures.
Step 4: Receive Certification and Documentation
After reviewing the submitted forms, the agencies will determine the eligibility of the employee for the WOTC program. If approved, they will issue a certification, such as the ETA Form 9062, confirming the employee’s eligibility for the tax credit. Make sure to retain this certification and any other relevant documentation, as they serve as proof when claiming credit.
Step 5: Claim the WOTC on Your Tax Return
When it’s time to file your tax return, don’t forget to claim WOTC. Do this by completing the appropriate sections of Form 5884, which reports the necessary information about the eligible employees and the corresponding tax credit amount. To ensure accuracy and compliance, consider working with a tax professional or using tax software that supports WOTC claims.
Step 6: Seek Professional Assistance
Navigating the WOTC program can be complex, especially if it’s your first time participating. Seeking professional assistance can streamline the process and maximize your benefits. Tax advisors, WOTC service providers or specialized software can guide you through eligibility determination, certification submission, and claiming the credit. Their expertise ensures you comply with regulations and optimize your tax advantages.
WOTC is a Win-Win
The WOTC program offers a win-win scenario for businesses and disadvantaged job seekers. By following these six steps, you can claim WOTC credits and unlock valuable tax benefits for your business, while also benefiting people who may otherwise struggle to find employment. Remember to stay updated on the specific guidelines provided by the IRS and your local administering agencies to ensure compliance.
Businesses who master WOTC can improve their cash flow by up to 40%. What’s stopping you?
Arcoro’s partner, Arvo Tech, has helped hundreds of businesses over the last decade-plus leverage the tax savings available with WOTC..
Contact us to learn more about Arcoro and Arvo and how we can help you navigate beneficial federal programs.
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