The Work Opportunity Tax Credit, a tax benefit program that lets companies of any size recoup up to $9,600 per qualifying hire, is a great opportunity for businesses to make money back on their taxes. Unfortunately, the program won’t last forever, and December 31st, 2019 is the current last day businesses can take advantage of this opportunity.
To take advantage of this program, you need to move fast. So how do you know which new hires qualify for WOTC credits? And what’s the best way to collect WOTC information to verify which of your new hires is a WOTC candidate?
Who Qualifies as a WOTC Candidate?
First, it’s important to understand who qualifies as a WOTC candidate, and the timeline you have for identifying and qualifying these candidates. The timeline is very tight—all required forms need to be sent to your State Workforce Agency within 28 days of a candidate’s first workday, and the IRS Form 8850 needs to be filled out the day of hiring! So if you’re looking to identify potential candidates, long term employees or new employees that have already started working for you can be immediately disqualified.
Instead, focus your screening efforts on the hires you are making right now. All WOTC candidates belong to certain groups currently receiving government financial assistance including returning veterans, SNAP beneficiaries and those living within a recognized Empowerment Zone. For more help on identifying which employees are WOTC candidates, use our previous guide.
When to Collect WOTC Information
There are two time periods during which you can collect the information necessary to identify WOTC candidates: during hiring and during onboarding.
Collecting information during the hiring stage is a double-edged sword. Asking before your hiring decision will allow you to include their WOTC candidacy in your decision-making process, but candidates will also be less likely to volunteer their information. Because qualification for WOTC candidacy requires a potential hire to admit certain things about their financial situation or personal background, collecting the information needed to identify WOTC candidates among your potential hires can be a sensitive situation. Potential hires may worry that they will be discriminated against because of their answers.
However, none of the WOTC qualifying questions violate federal anti-discriminatory regulations. The candidate’s race, religion, gender and orientation are irrelevant to whether or not they qualify for WOTC credit. In addition, answering qualifying questions must always be voluntary, meaning no company can require new hires to identify themselves as belonging to a qualifying WOTC group. In fact, answering self-qualifying questions is completely voluntary. Being upfront about the voluntary nature of the questions, as well as what the questions are for and how you plan to use the information can help you collect more self-qualifying information during the hiring process.
Or, you can screen for candidates once you have already made your hiring decision. Collecting information at this point means you won’t get to prioritize WOTC candidates during hiring and that you have a tighter window in terms of form submittal (since IRS Form 8850 needs to be filled out on or before the day they’re hired) but it also means there will be less reservation for the hire on whether or not to volunteer information—after all, they already got the job.
Having the new hire fill out form 8850 during the onboarding process will not only immediately let you know whether or not they are qualified candidates, it’s also a natural time to have them do it. As part of their acceptance of the job offer, you can have them fill out IRS 8850, along with other required forms like the W4, emergency contact information, etc.
Benefits of Electronic Filing
Finally, it’s important to remember that electronic signatures have been accepted on IRS Form 8850 since 2012. That means that there’s no reason to use inefficient hard copies during your WOTC filing. Keeping electronic copies will allow you to keep and easily find the information you need on your WOTC qualified hires once tax season rolls around.
Having an automated on-boarding and tax-form filling processor like EBS’s software can take the convenience of digital filing a step forward. Not only will such a processor help you collect information and identify qualifying WOTC candidates upon data entry, it will remember and auto-fill your relevant WOTC tax forms during tax season, as well as ensuring complete compliance with programs like the Affordable Care Act.