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.
We're Here to Help
Get advice from our experienced network of financial managers.
If you Value our Blog, We have an ask.
We spend hours researching data to help you understand your finances and taxes, including historical context, issues, and solutions. Our goal is to empower people to improve their relationship with money. Please consider a $3 donation today.
Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.