The Work Opportunity Tax Credit (WOTC) is a federal tax credit in the United States designed to incentivize employers to hire employees from certain target groups who have faced significant barriers to employment, such as veterans, individuals on public assistance, and ex-felons.
The credit is available to eligible employers who hire individuals from these ten target groups and who meet certain requirements. The amount of the credit is based on a percentage of the first-year wages paid to the eligible employee, with a maximum credit available per employee.
The average tax credit is around $2,400 and around 10-15% of new hires may be eligible.
CMS’s Brian Kelly answers your questions about the Work Opportunity Tax Credit.
WOTC Wednesday: Big question is “We get these WOTC Tax Credits, how are they calculated?” There’s actually two benchmarks, the first one is the employee has to work a minimum of 120 hours and qualify for one of the targeted groups. If they work over 120 hours that’s 25% of the employee’s gross wages up to the first $6,000. So if someone earned $1,000 worked 125 hours, the tax credit would be $250.
If they work over 400 hours you can get 40% of the first $6,000 in wages which is where that $2,400 tax calculation comes from.
Try the Work Opportunity Tax Credit Calculator
The Work Opportunity Tax Credit Calculator on our CMSWOTC.com website is designed to help you estimate the potential value of tax credit savings.
- Enter your industry (if not listed, select the closest industry to yours).
- Enter the expected number of new hires you expect to hire this year. You can base this on the typical turnover you have.
- That’s it! The calculator will give you an example of your potential savings.
- It’s typical to see a varying rate of 10-15% of new hires who qualify.
How iRecruit Can Help!
WOTC Screening can be included in iRecruit, as part of the application process, or in iConnect, as part of your new hire (online) paperwork. iRecruit improved its WOTC integration to make this easier for our customers.
CMS, the publisher of iRecruit, has been providing WOTC screening services for over 25 years and are experts in this field.
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