Hiring Credits

Employer WOTC Hiring Credits Retro to 1/1/12; Major $ Opportunity!

03.19.2013

Author

Jeff Aleixo

Big news and a big savings opportunity for employers right now:

Not only has WOTC been retroactively reauthorized going back to 1/1/12 through the end of 2013 (as part of the American Taxpayer Relief Act “ATRA”), but also…

As per IRS Notice 2013-14, employer claims for WOTC credit on hires going back to the start of 2012 will be considered timely if filed by April 29, 2013.

 

You Can Take WOTC Credit For All Eligible 2012-2013 Hires!

Becuase veterans were the single WOTC target group that remained eligible for employer credits throughout the course of 2012 under the VOW to Hire Veterans Act of 2011, there is a distinction between dates of eligibility for retroactive credit based on whether the eligible hire is a qualified Veteran or a member of another WOTC-eligible category.

Specifically, the extended filing date applies as follows:

  • For non-veteran WOTC hires, employers may claim the credit for those hired on or after January 1, 2012 and on or before March 31, 2013.
  • For WOTC-qualified veterans, employers may claim the credit retroactively for hires made on or after January 1, 2013 and on or before March 31, 2013.

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 even for WOTC-qualified veteran hires, this is a substantial extension.

The National WOTC Coordinator has confirmed that the filing extension applies to BOTH the applicant/new hire as well as the employer portions of the Form, so that employers can go back for new hires within the relevant time frame and together with the employee complete a Form 8850 for submission, even if they were not pre-screened at or before hire.

It’s estimated that approximately 10-25% of all new hires are WOTC-eligible, with variation across industries and geographic region. This is credit that is traditionally under-used by employers, but perhaps these unique circumstances will change that.

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 2012, 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

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 info. may not meet actual eligibility criteria).

90 WOTC-eligible hires – 15 lost to poor paperwork/disqualified = 75

Say we now have 75 WOTC-eligible employees from 2012, 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 from 2012 

It’s a significant and important potential offset to the elevated employment taxes that employers have been enduring in recent years.

Download the presentation slides and audio from our 30 minute presentation on WOTC in 2013.

Whether or not you have an existing WOTC program in place, learn how you can extract maximum savings from your hiring credits program.

 

Read about ETS Credits PLUS Hiring Credits Services here.

You may be interested in reading our other posts on WOTC and employer hiring credits here. 

Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.
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