Maximizing the Potential of Your Employment Tax Credits and WOTC

Monday, July 21, 2014, 1:00 AM | Leave Comment

It is important to help your business streamline payroll and human resources management through the latest computer technology. One way you can help a business is by effectively using employment tax services to process the employment tax credit benefits.

As any company grows in terms of employees, there is a higher potential to capitalize on a tax structure that can benefits the type of workers a company employs.

This is through the Department of Labor’s Work Opportunity Tax Credit or WOTC. Here is how your business can maximize the potential benefits under the WOTC.

  • What the WOTC Does

    The WOTC incentivizes businesses to hire specific groups of people as full-time workers. Under the Department of Labor definitions, target groups are groups that have historically faced discrimination and employment barriers in the history of the United States.

    This includes veterans, Temporary Assistance for Needy Families (TANF) recipients, a Supplemental Nutritional Assistance Program (SNAP) recipients, a person with a disability that completed employment or rehabilitative program, ex-felons, and 16-39 year olds who live in a federal Empowerment Zone.

    By hiring these individuals part-time, the business can claim a tax credit of 25% of that worker’s first year wages. By hiring full-time, the business can claim a tax credit of 40% of that worker’s first year wages. As a result, a business can hire a qualified worker while attaining a tax credit for hiring the individual.

  • Documentation Is Important

    With the help of a company like, a business can store and utilize the proper documentation to show the Department of Labor their WOTC-based hire.

    The Department of Labor requires immense documentation so that the business meets the WOTC definitions. That means the business and the worker need to provide documentation stating their target group status and how much they are working.

    By keeping this documentation, the Department of Labor will quickly confirm the worker and the employer can receive their credit.

  • Actively Recruit in Empowerment Zones

    Empowerment Zones are federally designated regions under the Department of Housing and Urban Development. The zones are usually historically economically stressed communities.

    The Department of Labor works with the Department of Housing and Urban Development to categorize potential job seekers as a target group member under WOTC.

    Using federally available maps and recruitment strategies, businesses can actively recruit workers from Empowerment Zones so that the business can attain the human capital of a new worker while simultaneously saving on the hire with a tax credit.

  • Sensitive Screening

    Businesses need to efficiently, but sensitively screen potential employees to see if they meet basic WOTC definitions. With electronic invoicing companies as a resource, a business can take a large load of job seekers and screen through the applicants quickly.

    The point is to not drag out the screening process since it will cost money over time to recruit and interview workers.

    However, very sensitive background checks are required, especially because of the nature of who is considered a target group.

    Using information on the job application sheet as well as an analytical background check, electronic cloud based companies can help businesses find potential WOTC workers and reduce the time it takes to find and hire a worker.

  • Seek All Potential Credits

    The WOTC is not the only employment credit out there. Many states will create employment credits to help foster businesses to hire particular groups of workers.

    The advantage of using a company such as ADP is that the professionals at will search tirelessly for all federal and state-level employment credits the business may be applicable for.

    This process should not be done in-house as it can consume too much time and money by the business.

    Outsourcing can vastly improve the chances that the business hires an applicant that can fall under a federal or state work credit.

Work credits exist to incentivize businesses to hire people from historically and economically disadvantaged backgrounds. This provides a societal benefit since a qualified applicant can find a good job and the business can receive a tax benefit for their human resource decision. With the proper help, any business can plan out their WOTC and employment tax credit strategies.

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