Timing is Everything With WOTC

Famed English actor Jeremy Irons said, “The secret to life is timing.” So too is success with the Work Opportunity Tax Credit!

Also known as “WOTC” (pronounced Watt See), the Work Opportunity Tax Credit rewards businesses with $2,400 to $9,600 in federal income tax credit when they hire members of a WOTC target group.   Read More>>


The Value of Hiring the Formerly Incarcerated

Have you considered the value of hiring the formerly incarcerated? The Work Opportunity Tax Credit (WOTC) might reward your business if you do (more about that later).

And yes, when I say, “formerly incarcerated”, I mean ex-felons. People who’ve been convicted of a felony and paid the price. Many of them have emerged from that difficult experience with a new and improved perspective on their lives. Read more>>

Expand WOTC Again? Yes! Hire Veteran Students Using GI Bill

Congresswoman Jacky Rosen, a Democrat from Nevada, issued a press release describing her effort to expand the Work Opportunity Tax Credit (aka WOTC). House Resolution 6392, known as the Hire Student Veterans Act, would add a new target group to the WOTC program.

What does this legislation do? If passed, the Hire Student Veterans Act would offer employers a tax credit for hiring veterans of the armed forces who are “attending an institute of education” while receiving educational assistance from the GI Bill.  It would provide a maximum tax credit of $2,400—equal to 40% of the veteran’s first $6,000 in wages.  This is a standard WOTC scenario.

However, because this bill targets students (who are often not able to work full time), it proposes to lower the WOTC program’s usual 400-hours threshold.  For other target groups, if a qualifying employee works less than 400 hours, the rate used to calculate the tax credit must be reduced from 40% to 25%.  Under this bill, the 40% calculation rate kicks in with a minimum of just 120 hours worked.

Congresswoman Rosen:

“I’m proud to introduce this legislation that will help our student veterans using their GI Bill benefits find paid internships or jobs while in school. This bipartisan plan will help incentivize businesses to hire student veterans, giving them the opportunity to advance their careers while continuing the transition back into civilian life.”

This bill currently has three additional cosponsors, including Democrat Debbie Dingell (MI) and Republicans Leonard Lance (NJ) and Daniel M. Donovan, Jr. (NY).

We’ll keep you posted of any new developments for this bill.

Earn Real Tax Savings for Hiring Veterans

This is a follow-up to my recent post about tax benefits employers earn by hiring military veterans. In addition to strong skill sets and personal characteristics, many veterans can bring an added financial benefit to their employer through the Work Opportunity Tax Credit (or WOTC).

Employers naturally have questions about how veterans qualify. How long must a veteran have served? What if they have a service-connected disability? What are the specific tax credit amounts? Today, I’ll go into these details.

If you have questions that I don’t answer here, please feel welcome to email or call me at WOTC Planet.

Which Veterans Are Eligible? To be considered for WOTC, a veteran first must have served more than 180 days of active duty (not including training) – unless, of course, they were discharged sooner because of a service-connected disability. Additionally, their last period of “extended active duty” must have ended at least 61 days prior to their date of hire.

These are the two threshold considerations and most veterans you hire will pass them both with colors flying.

They must then also meet at least one of the WOTC-eligibility criteria shown in the table below, where I also list the maximum amount of tax credit your business can earn. Please notice that the amount varies, depending on why a veteran qualifies for WOTC.

Eligible-Veteran Criteria Maximum Tax Credit
Member of a family that received SNAP benefits for at least 3 of the past 15 months $2,400
Unemployed for at least 4 weeks (any 4) during the past year $2,400
Discharged within the past year and entitled to compensation for a service-connected disability $4,800
Unemployed for at least 6 months (any 6) during the past year $5,600
Entitled to compensation for a service-connected disability and unemployed for at least 6 months (any 6) during the past year $9,600

These tax credits amounts are per eligible employee and there is NO LIMIT to the number of WOTC-qualified employees you can hire. If your business can sustain 5, 10 or 50 new veterans annually, all the better for both you and them!

Keep in mind that non-veterans also qualify for WOTC. So, if a veteran’s circumstances do not match any of the veteran-specific criteria listed above, they might still qualify under another WOTC target group. We’ll cover those in another post.

How the Tax Credits Add Up. This part gets a little technical. WOTC tax credit amounts are equal to a percentage (40%) of the wages you pay the veteran during his or her first year of work. The amount of wage you can use in the calculation is capped at a maximum amount — and that amount varies according to why a veteran qualifies. This is why the tax credit amounts listed in the table above range between $2,400 and $9,600.

A few other details can also affect the tax credit amount. If a veteran works less than 400 hours before leaving your company, the percentage used to calculate the tax credit must be reduced from 40% to 25%. If the veteran works less than 120 hours, it’s reduced to 0%. That means no tax credit is available if an employee leaves or is terminated before they’ve worked at least 120 hours.

Walk the Line . . . but Make It Easy. Anything having to do with the military or federal tax code will have strict rules to follow, especially when you’re going to reduce your federal tax bill. To qualify for WOTC, new hires must provide eligibility information on or before the day you offer them a job. There are forms to complete, applications to submit and certifications that you need. The rules allow just 28 days to submit employee application to your state workforce agency.

It sounds difficult. It can be.

That’s where a good WOTC services provider can be very useful. Hint. . .  make it easy on yourself and look into it.

Veteran Hiring Programs. Hiring veterans is advantageous for many reasons. Their experience and training make them uniquely valuable employees. The financial benefit of the Work Opportunity Tax Credit is maximized for veterans and offers one more way veterans can be an asset to your organization.

Another Reason Veterans Matter to Small Business

If you’re a business owner, CPA or hiring executive, this is for you. Everyone knows that hiring veterans is both the right thing and the smart thing to do for many reasons.

Military veterans bring a unique set of skills to the civilian labor market. Few organizations like the military can teach, enforce and reward the characteristics of teamwork, initiative, leadership, organization and mission.

The military is also a highly diverse and talented group of people. As a result, veterans have deep experience working well with others. That experience instills respect and the ability to adapt and excel in a wide variety of circumstances.

What’s in it for the Business?

In addition to their strong skill sets and personal characteristics, veterans can bring an added financial benefit to their employer via the Work Opportunity Tax Credit (aka WOTC). WOTC (pronounced watt-see) is a federal tax credit available to employers who hire individuals with significant barriers to employment.

Despite their excellent credentials, veterans experience high unemployment rates and are therefore considered a valuable WOTC target group. This is particular true of disabled veterans who were injured while serving in the armed forces.

The tax credit amount equals a percentage of the wages earned by the veteran during his or her first 12 months of work. Depending on why they qualified, the maximum tax credit ranges between $2,400 and $9,600 for each qualifying veteran hired. This tax credit offsets their employer’s federal income tax, dollar for dollar!

Veteran Hiring Programs

Many businesses hire veterans but are not aware of the WOTC program. They are not requesting the required WOTC forms and are therefore missing out on significant tax savings. Once they understand the personal and financial benefits of hiring veterans who qualify for WOTC, a business is more likely to make it a real priority.

For example, what if a small company hires 10 veterans and 5 of them qualify for WOTC? That business has gained 10 excellent employees. If the 5 qualifying employees generate on average just $5,600 each, the business has also earned $28,000 in federal tax savings (5 x 5,600 = 28,000).

What’s the Catch?

There really isn’t one. Businesses that hire our nation’s veterans are offered the maximum WOTC tax credit available. It’s a win-win. Veterans find jobs while employers gain some of the very best employees available. And the WOTC program gives private business an extra financial incentive to help the men and women that have so faithfully and loyally served our country.