While many companies may know that the Work Opportunity Tax Credit can grant them a large tax benefit for hiring qualifying employees, many don’t actually know how to identify a WOTC candidate. Because of this, many companies miss out on claiming qualified new hires and getting the resulting tax benefits. Considering you can get a benefit of up to $9,600 for each qualified WOTC hire, that’s a lot of money to lose when these WOTC candidates slip through the cracks!
In order to figure out which new employees are WOTC candidates, and to get the required paperwork in on time to claim them for the tax benefit, it’s important to understand the requirements for claiming a WOTC candidate and to have a process for identifying those potential candidates in place.
Knowing WOTC Candidate Categories
Before being able to identify and capture your WOTC candidates, you need to understand who qualifies. Eligible new WOTC hires belong to one of several target groups that receive assistant from the federal government. These target groups include:
- Unemployed or disabled veterans
- Temporary Assistance for Needy Families (TANF) Recipients
- Food Stamp (SNAP) Recipients
- Residents of Empowerment Zones or Rural Renewal Counties
- Vocational Rehabilitation Referred Individuals
- Re-Entering Ex-Convicts
- Supplemental Security Income Recipients
- Summer Youth Employees from Empowerment Zones
- Qualified Long-Term Unemployment Recipients
Each of these target groups may have further requirements, such as only having been on government assistance for a certain amount of time within the last six to eighteen months. For further specifications, see the United States Department of Labor’s webpage on eligible WOTC hires.
Collecting WOTC Qualifying Information
Once you know what types of new hires will qualify for the Work Opportunity Tax Credit, you need to develop a process for collecting WOTC candidate information quickly. After all, there are two important deadlines you will have to meet within a month of your new hire’s first day of work in order to successfully claim them and get the associated tax benefits.
IRS Form 8850 must be completed before or on the day the job offer is made. It requires information from both the new hire believed to be a WOTC candidate and the employee. This form is part of the paperwork needed to assess and certify your new hire as a valid WOTC candidate. Good news: this can now be done electronically.
You will also need to complete either ETA Form 9061 or ETA Form 9062 and send it and the previously completed IRS form to your state workforce agency no later than 28 days after the new hire’s start date. Together, these two forms allow the SWA to confirm and certify that your new hire will be able to be claimed for WOTC tax benefits at the end of the year.
Screening for WOTC Candidates
Because submitting these crucial forms must be done so soon after the job offer, it’s important to have a process in place for collecting the relevant information as fast as possible. There are two main methods for when and how to collect information on whether a new hire counts as a WOTC candidate:
1. During the Hiring Process
Including a paper or electronic questionnaire in your hiring process is a great way to screen for WOTC candidacy. It’s also completely legal, and in fact encouraged, to include information about WOTC candidacy in your hiring decisions. WOTC candidacy is purposefully designed to be compatible with federal anti-discrimination requirements and at no point requires knowing the candidate’s race, color, religion, gender or orientation.
Despite avoiding these topics, many potential hires may still feel uncomfortable answering questions about whether or not they have received government financial assistance. All WOTC screening questions have to be answered voluntarily, so it’s best to make sure that any questionnaires given during the hiring process include clear language about the questionnaire being both voluntary and only used for determining WOTC candidacy.
2. Upon Job Offer
Screening new hires for WOTC candidacy can also be done once a job offer is made. On the positive side, this requires less cost and effort because you are screening only applicants you have already decided to hire. It also assures that the applicant knows they are not at risk of being disqualified as a potential hire because of their answers, so they have less fear when asked to voluntarily answer the required questions.
Unfortunately, screening for WOTC candidates only after a job offer has been made tightens the deadline for collecting and submitting the relevant information to the SWA. If the new hire doesn’t get the qualifying information to you immediately, they will slip through the cracks and you won’t be able to claim them for their associated tax benefits.
Ultimately, how and when you collect information for screening WOTC candidates depends on what is most compatible with your ideal employee on-boarding process. After all, the best WOTC screening process is the one you’ll actually use! The important part is to have a plan and process in place to make sure you get the relevant information from candidates as quickly as possible.