Additionally, with the way the target groups are created, existing employees likely wouldn’t qualify for the tax credit anyway. Let’s explore the basics of the WOTC program—and how employers can make the most of the opportunity to offset federal tax liabilities while minimizing the cost/effort involved. We’ve seen a 30 percent increase in wotc adp screening compliance in the past year. As a result, our credits will likely increase substantially as they are processed.

Employers can receive tax credits of up to $9,600 per qualified new hire, depending upon the new hire’s WOTC target group. Before an employer can hire someone under the WOTC program, the candidate must demonstrate their eligibility by filling out the first page of IRS Form 8850 and returning it to you, either on or before the job offer date. This form lists the conditions under which someone from one of these target groups qualifies for the program. ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice.

Are you a people-centric organization?

Employers may qualify for the WOTC if they hire an individual who is a member of one of the target groups determined by the IRS to have historically faced barriers to employment. The first, ETA Form 9061, or the Individual Characteristics Form (ICF), provides specific information about how an applicant answered the WOTC questionnaire. The second, ETA Form 9062, is the Conditional Certification Form for applicants who have been pre-screened for WOTC by an SWA. This new online process is very forward-thinking, especially since we can provide the barcode and they can screen directly from their smartphones.

Should I fill out Work Opportunity Tax Credit (WOTC) survey even if I know it doesn’t apply to me?

Just in case you missed it, the Internal Revenue Service (IRS) recently issued an update clarifying the prescreening process of new hires for the Work Opportunity Tax Credit (WOTC). First created by Congress in 1996, the WOTC is a federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. The targeted groups include qualified veterans, ex-felons, qualified Supplemental Nutrition Assistance Program (SNAP) benefit recipients, qualified Supplemental Security Income (SSI) recipients, and qualified long-term unemployed just to name a few. An employer must pre-screen and obtain certification from the appropriate Designated Local Agency (referred to as a State Workforce Agency or SWA) that an employee is a member of a targeted group to claim the credit. The Targeted Jobs Tax Credit (TJTC), which preceded WOTC, did not contain a pre-screening requirement. In enacting WOTC to replace the TJTC in 1996, Congress included the requirement that employers pre-screen job applicants before or on the same day the job offer is made.

WOTC target group definitions and available credits are summarized in the tables below. Read how ADP helped the Restaurant Management Company make the most of their WOTC screening. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. I want to extend a huge thanks to Bonita for sharing her knowledge with us.

Taxable employers

If so, you may have been screened for eligibility for the Work Opportunity Tax Credit (WOTC). Employers who rehire a former employee, a family member or dependent, or someone who will be a majority owner in the business may not be able to claim the tax credit for that individual (even if the individual is otherwise a member of an eligible target group). When it’s time to hire a new employee for your company, you have an opportunity to qualify for a tax credit at the same time. The government offers several credits when you hire from groups that need help finding jobs, and the Work Opportunity Tax Credit program (WOTC) is one of the largest. Generally, the wages that are used to calculate the WOTC cannot be used to calculate other wage-based credits, however an employer may be able to claim more than one wage-based credit for the same employee.

• The second, ETA Form 9062, is the Conditional Certification Form for applicants who have been pre-screened for WOTC by an SWA.
• Does the manner in which your organization manages its WOTC program make it more of a financial boon or an administrative burden?
• Doing so during the employee application process creates an opportunity to do so in a way that is consistent and captures the right qualifying information without unnecessary manual effort.
• Introducing WOTC screening that gives a brief description of the program and encourages the applicant to complete the screening without fear of discrimination for their responses is also very helpful.
• This information must be captured on or before the day a job offer is made to the applicant.
• The steps themselves are relatively straight-forward, but they can be overwhelming when there are large volumes of applicants and new hires to process.

Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at /regulatorynews. A taxable business may apply the credit against its business income tax liability. In general, taxable employers may carry the current year’s unused WOTC back one year and then forward up to 20 years.

What differentiates ADP from other Work Opportunity Tax Credit providers?

Remember, the program has been in place for more than 25 years with most major employers participating in WOTC screening so asking the screening questions isn’t anything new. Introducing WOTC screening that gives a brief description of the program and encourages the applicant to complete the screening without fear of discrimination for their responses is also very helpful. We have the expertise you need to capture the maximum amount of tax credits and incentives for your organization.

Integration Details

Each Form 5884-C determines the cumulative credit the organization is entitled to for all periods. The amount of the cumulative credit is reduced by the previously claimed credits and increased by any previously repaid amounts to determine the credit claimed for the employment tax period for which the Form 5884-C is filed. If the credit refunded for a prior period was limited by the employer’s social security tax liability for that period, any credit not refunded will be carried forward and included in the cumulative credit determined on any subsequent Form 5884-C. The Cornerstone Connector for Work Opportunity Tax Credit (WOTC) Integration provides recruiters a seamless process to identify applicants that may qualify for the WOTC tax credits. With this integration, recruiters are able to assign ADP WOTC questionnaires from within the Cornerstone portal to determine qualification. This enables organizations to maximize tax credits through federal programs in support of hiring from targeted populations.

• Just in case you missed it, the Internal Revenue Service (IRS) recently issued an update clarifying the prescreening process of new hires for the Work Opportunity Tax Credit (WOTC).
• IRS highlights that WOTC screening must occur “on or before the date a job offer is made.”
• WOTC target group definitions and available credits are summarized in the tables below.
• See the Instructions to Form 3800 (General Business Credit) for more information.
• But all too often however, companies fail to fully capitalize on the benefits of this tax credit—or spend more time and effort than necessary when trying to manage their tax credits.
• For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at /regulatorynews.
• If your organization is growing, training, relocating, investing in facilities or consolidating, you may be eligible to take advantage of other tax credits and incentives.

The tax credit amount is equal to 40% of the employee’s qualified wages if the employee works at least 400 hours during the first year of employment. If the employee works less than 400 hours, but at least 120 hours, then you can claim a credit equal to 25% of the employee’s qualified wages. Any business, regardless of size or industry, may be eligible to claim tax credits under the WOTC program. And because there’s no limit to the number of individuals employers can hire as part of the program, there’s also no cap on the amount of credits that they can claim. Richardson For most employers the best place to screen for WOTC is when the applicant completes the initial application.