Basic Facts about the Work Opportunity Tax Credit System

The work opportunity tax credit system functions by helping people with certain types of employment barriers. It offers employers a small amount of incentive for helping the right candidates with jobs. Three important factors are taken into consideration: the total number of hours, the salary paid to workers during year one, and the type of employees hired. In this tax credit system, the eligibility criterion has to be defined. Here, eligibility focuses on your opportunity of getting the tax credit.

Let’s understand this with an example: Imagine you have chosen to hire a veteran. Your company will be eligible for the tax credit benefit. But, the veteran will not have any rewards. The Work Opportunity Tax Credit System is meant for employers alone.

Workers who qualify 

Employers need to be aware of workers, who can help them receive this tax benefit. When you come across a candidate, it is important to judge if their role can increase your chances of gaining the tax credit. Many times, this system holds good when you hire veterans, SNAP recipients, vocational rehabilitation referrals, candidates from empowerment zones, summer youth candidates, ex-felons, supplementary security income candidates, and TANF recipients.

Apart from this generalized list, you have a few more categories. You need to go through the regional labor chart to identify the other categories.

Qualifying Workers

When you wish to qualify for the tax credit through a specific employee, two separate forms need to be filled during the hiring process. If these forms are not completed during the hiring phase, your company will not be eligible for the tax credit. Hence, ensure that the forms are integrated into your hiring process. The very first form to be filled would be the IRS 8850. This is a common pre-screening application. This form carries details about when the candidate was given an offer and hired. Likewise, you need to disclose details about the hiring process. The second document to be completed would be the Labor Form 9061. This form has to be completed by the candidate. And, the employer needs to ensure that all the details provided are valid. Many times, candidates have Labor Form 6092 completed ahead of time!

The moment your chosen candidate starts to work at your firm, these forms need to be submitted at the State Workforce Agency. Henceforth, the eligibility of the candidate will be judged, and you will be awarded with WOTC.