Tax credits are dispensed when a business does something valuable within the community. Giving to charity and providing child care, for example, earn tax credits. So too, can hiring. This is called the Point-of-Hire (POH) tax credit. Is your business claiming your full savings?
A business’ role as an employer is among its most important functions to the nation. Certainly, manufacturing shoes or selling groceries is important, but employing the populace is essential to the flow of industry. Each person on your team is one more person who is employed vs. unemployed. One more person receiving a reliable income and contributing their skills to the greater economy. Each time your company hires a new employee, you benefit the economy through that employment.
Employment is the path out of many situations of economic disadvantage and dependency. This is especially true in vulnerable and struggling population groups. From elevating youth into a career to employing veterans and the disabled, both federal and state governments offer business tax credits based on the opportunities offered to target-group employees. Accessing these credits requires each company to choose a Point of Hire tax credit solution to screen, verify, apply, and claim the credit each year.
What is the Point of Hire Tax Credit?
The Point of Hire tax credit is a type of tax credit given to businesses for hiring employees in disadvantaged situations. Targeted groups include veterans, SNAP and SSI recipients, and youth from Empowerment Zones, among others who benefit acutely from access to employment and career opportunities. POH tax credits are usually offered at the state level. Point of Hire tax credit is based on and paired with the WOTC (Work Opportunity Tax Credit) provided by the federal government.
The POH tax credit is available to all businesses, rewarding opportunities provided during standard hiring procedures. The credit was designed to promote diverse hiring and encourage businesses to hire from disadvantaged populations who have the most to gain from employment opportunities.
How to Get Your Company’s POH Tax Credits
The first step of claiming your POH tax credits is pre-screening for qualification. Your business must qualify, and credits only apply to new hires within specific target groups. It’s important to carefully screen your POH applications to ensure that each claim is qualified for the tax credit and how much. You must file your pre-screening application within 28 days.
POH and WOTC Target Groups
Which newly hired employees qualify your company for Point of Hire tax credits? The target groups are usually identified by their access to financial services due to poverty-line existence. This may be from a medical condition, legal status, or disadvantageous financial circumstances. The POH and WOTC programs are designed to promote these disadvantaged groups by providing a tax credit to companies that help employ these groups and improve their prospects through career advancement.
- IV-A & TANF Recipients
- Temporary assistance for needy families
- Qualified Veterans
- Vocational Rehabilitation Referrals
- A person with physical or mental disabilities is referred to the employer while in a rehabilitative service plan.
- Summer Youth Employees
- 16-18-year-old youths from Empowerment Zones, enterprise communities, and renewal communities
- Employed between May 1 and Sept 15
- SSI Recipients
- Long Term Family Assistance Recipient
- Qualified Long-Term Unemployment Recipient
- Unemployed for longer than 27 weeks
POH vs. WOTC: What’s the Difference?
- Work Opportunity Tax Credit is a Federal Program
- Point of Hire tax credits are a type of tax credit offered by federal and state governments.
One of the biggest questions in Point of Hire programs is the relation to WOTC. When you look up either acronym, the other appears. They seem to be synonymous. Is Point of Hire the same as Work Opportunity Tax Credits? The answer is yes, and no.
WOTC is a point-of-hire program provided by the federal government to all eligible companies who employ certain financially at-risk groups. It is also an inspiring policy that many states took up individually. State programs that piggyback this and offer additional incentives are usually referred to simply as Point of Hire instead of using the federal Work Opportunity designator.
WOTC is the federal policy inspiration for most POH state programs. However, linguistically Point of Hire is the category, and WOTC is a point of hire style tax credit.
What is Required for POH Tax Credits
To claim your Point of Hire tax credit, you’ll first need a certificate of eligibility. To get this, you send a Form 8850 pre-screening application. If you get a certificate back, you can claim the credit with a Form 5884 or 3800. The most time-consuming part of the process is pre-screening to ensure that your circumstances qualify by the POH tax credit. The IRS also recommends that qualified tax-exempt employers not change their calculations in the assumption that the credit will be approved.
Pre-Screen to Determine Your POH Eligibility
The first and very important step is to confirm that your recent hire meets eligibility requirements. A close investigation may be necessary to determine all related factors and qualifiers. This includes very data-sensitive details about each new hire’s financial and personal status, information that must be respected and closely guarded while you have it, and may not be legal to discuss during job interviews for reasons outlined by the EEOC.
Fill and Submit Form 8850 to Request an Eligibility Certificate
Once you have determined internally that a hire is POH eligible, complete and file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit within 28 days of the first day of work, you will need to identify and outline each of the qualifying factors to expect a certificate of POH tax credit approval.
Claim the POH Tax Credit with Form 588-C
After receiving a certificate, file a tax-exemption claim against the employer’s Social Security tax with a Form 5884-C or possibly a 3800 based on your circumstances.
Quentelle’s Point of Hire Tax Credit Solutions
Is your business missing out on potential POH tax credit exemptions? Capable employees are often included in target groups in the process of overcoming any disadvantages without mentioning the process to coworkers. However, certain fact-checking can provide you with greater resources to benefit more new hires and better career development programs for tax purposes.
The Quentelle team is here to help you through every step of the POH tax exemption process. Our POH tax exemption solutions include pre-screening, form submission, certificate acquisition precise tax exemption claim filing. To schedule a demo or a consultation with our business tax credit experts, contact Quentelle today.