Transition Relief on WOTC Credits: Act Now, Window Closes April 30th

Great news for employers!

When we recently posted about WOTC hiring creditsbeing retroactively reinstated, we explained that it applied to eligible new hires onboarded during 2014— but only for employers who had continued to submit their WOTC applications timely throughout the credit lapse in 2014.

As luck would have it, on February 19th, the IRS issued a notice (Notice N-2015-13) providing “transition relief” to employers who neglected to keep up with timely WOTC applications throughout the credit lapse.

Normally, to qualify for WOTC: 1) the applicant must complete pre-certification Form 8850 on or before date of hire, and 2) employers must submit the completed Form 8850 to the state workforce agency within 28 days from the first day of work, so this is a substantial extension.

Though such a lucky break is atypical for employers who have come to expect regular WOTC credit lapses, it is not unheard of. Some may remember that similar (but shorter) relief periods were extended with the Vow to Hire a Hero Act of 2011 and the American Taxpayer Relief Act of 2012.

Countdown to April 30th: the clock is ticking!

Employers now have a limited window of opportunity to apply retroactively for WOTC credits on eligible new hires employed between January 1, 2014 and December 31, 2014. This window closes on April 30th, 2015, which is just enough time to take advantage of a major savings opportunity. But don’t wait . . . it will be here before you know it.

Perhaps your business hasn’t been committed to WOTC hiring credits in the past. Here’s why you should go after them. You can get a bottom line tax savings of up to $9,600 per eligible hire. If you aren’t already screening for eligible hiring credits, there is no way for you to know what kind of savings you are passing up. If you are screening, it should be easy to see how much you stand to gain.

Here’s how a conservative estimate of WOTC credits led to $180K in employer savings:

An estimated 10-25% of all new hires are WOTC-eligible, with variation across industries and geographic regions. The employer credit from WOTC is typically 40% of the first $6,000 wages earned by a qualified employee. So, for an employer that hired 50 new employees in each month of the prior year, assuming 15% of those hires are WOTC-eligible, that translates to 90 WOTC-eligible hires for the year.

50 hires per month x 12 months= 600 x .15 percent WOTC-eligible = 90

 

Let’s lose some of those eligible hires on account of not having 100% form completion rate and the state agency not approving all of our submitted forms (as applicant detail may not meet eligibility criteria).
90 WOTC-eligible hires – 15 lost to poor paperwork / disqualification = 75
We now have 75 WOTC-eligible employees from the prior year, and all of them worked full-time and earned at least $7.50/hr.
75 employees x .4 WOTC Credit Rate x $6,000 EE Wages =
$180,000 in retro WOTC savings


Did you already submit a WOTC credit request to a state agency during the course of 2014?

If the request was denied despite meeting all of the requirements, the appropriate State Workforce Agency (SWA) must now revisit and re-process your certification requests. If the claim was denied because it didn’t meet the necessary requirements, you may consult with a tax credit expert as to whether it makes sense to re-file.

The bulk of WOTC credit applications submitted throughout 2014 are currently being processed by the SWAs.

Emptech is here to help you complete and submit hiring credit certification requirements to the relevant state agencies, should you need assistance. Download our Hiring Credits brochure here to see how easy it can be.