The Work Opportunity Tax Credit (WOTC) is a federal government tax credit that was established to help reduce the employment barriers faced by certain groups. This includes select veterans as well as individuals receiving government assistance such as SNAP (Supplemental Nutritional Assistance Program) and TANF (Temporary Assistance to Needy Families), to name a few. There is new proposed WOTC legislation introduced in 2021, that enhances the program. We’ll go over what this means for employers and discuss how you take advantage of these enhancements.
Quentelle’s premier team of employer tax credit experts are here to help you decode the legalese of these new WOTC legislation updates, and find a solution to maximize those benefits for your business.
What is WOTC?
WOTC was first introduced to Congress in 1996 as the Welfare-to-Work Tax Credit Act. The legislation was created with bipartisan support and signed into law by President Clinton on August 22, 1996. It passed both chambers of Congress without a dissenting vote. Since then, there have been several changes made to this credit including an extension in 2005.
Who is Eligible for WOTC?
There are currently nine different target groups that are eligible to participate in this program. The list includes:
- Qualified veterans
- Designated Community Residents (DCR)
- Vocational rehabilitation referrals
- Ex-felons
- Summer youth workers (over 16 years old, but under 18)
- SSI beneficiaries
- SNAP recipients
- TANF recipients
- Qualified long-term unemployment recipients
Businesses can receive a tax credit ranging between $1,500 and $9,600 for each certified target group member hired. The maximum amount of WOTC money that an employer can receive is limited by a wage cap based on the target group they belong to. For instance, a SNAP recipient can earn an employer a maximum credit of $2,400, while a disabled veteran that is also unemployed for 6+ months can earn $9,600 in tax credits for the same employer.
The Work Opportunity Tax Credit Program has undergone several modifications since its inception. However, this time it may be changing significantly.
WOTC Legislation 2021: What’s New?
The House of Representatives Ways and Means Committee approved tax provisions for the Build Back Better Act on September 15th, 2021. The approved provision proposes several changes to the tax code and includes significant enhancements to WOTC effective from the date of enactment of the Build Back Better Act, through December 31st, 2022.
The following is a summary of the proposed changes:
- Credit Amount Increase – increases the credit per certified employee (for most target groups) from $2,400 credit to $10,000
- WOTC; a 2-Year Credit – $5,000 per certified employee, for years 1 and 2, for a maximum credit of $10,000
- Re-hires Eligible – through a temporary waiver of the rehire exemption
- No Change for Certified Summer Youth – these hires remains the same as in the current program
While these proposed changes are still far from becoming law and may be temporary in nature, it could be the equivalent of putting WOTC on steroids. Next steps will involve intense negotiations with the Senate for a final bill.
If you’re interested in a provider who can help you maximize these benefits, look no further than Quentelle.
Quentelle’s HR Solutions Make WOTC Easier
Quentelle delivers a suite of HR solutions powered by an award-winning technology platform. Our WOTC service bundles include screening for WOTC, verification of employment and income, administration of unemployment insurance (UI) claims, and UI Tax consulting services. We are here to help you understand your hiring requirements under the new WOTC legislation in 2021. Contact us today to learn more about what Quentelle can do for you.