New Law: Now is the Time to Take Advantage of the Work Opportunity Tax Credit

Your reasonable efforts are rewarded with the Work Opportunity Tax Credit.

And, thanks to new legislation, the rules are now in place for a more extended period than typical.

If you need to hire employees for your firm, you should be aware of this tax break that reduces your taxes dollar for dollar.

Presume your company recruits someone from a specific demographic. In that situation, you can claim a portion of the individual's wages as part of the federal Work Opportunity Tax Credit (WOTC).

A Summary of the Credit

The credit usually equals 40% of a qualifying employee's qualified first-year pay, up to a maximum wage amount of $6,000. This equates to a credit of up to $2,400 (40 percent x $6,000).

Of course, some employees refuse to exercise. The credit rate for an employee who completes at least 120 but fewer than 400 hours of service is reduced to 25% of eligible first-year compensation. This equals a maximum credit of $1,500 (25 percent of $6,000).

Employees Who Qualify

Your new recruit must be certified as a targeted group member by the appropriate State Workforce Agency to be eligible (SWA). As the employer, you have two options.

If you would like our help with the WOTC, please don't hesitate to contact us.