Many employers are not aware of the Work Opportunity Tax Credit (WOTC) program, and that they could be receiving a significant amount of tax credits every year. The WOTC program is voluntary for businesses to take advantage of and its aim is to:
- promote the hiring of individuals who qualify as a member of a target group, and
- provide a federal tax credit to employers who hire these individuals.
U.S. employers can potentially earn tax credits up to $9,600 per qualified new employee. The exact tax benefit amount that a business can receive depends on several factors, including how long the new employee was unemployed, the employee’s salary, and the number of hours worked in the first year.
The first step is to identify new hires from the credit-eligible groups. For most businesses, identifying these individuals is a labor-intensive task because it requires more work than simply taking the usual hiring steps. Only new hires are eligible to be submitted for tax credits if they fall within the specified target groups. This does not include current or rehired employees.
Taking into consideration the strict application deadlines and required paperwork, WOTC administration can be a difficult task for busy staffing professionals to perform. Once an employer identifies WOTC-eligible workers, it is time for the paperwork.
Required forms must be completed and their filing is time-sensitive. As with all things tax-related, proper forms and timely filing is critical. Taking into consideration the strict application deadlines and required paperwork, WOTC administration can be a difficult task for busy staffing professionals to perform.
However, WOTC management companies offer you a paperless WOTC solution encompassing everything from electronically tracking candidate eligibility to submitting documentation on an employer’s behalf, thus ensuring that all regulations are met correctly in order to obtain earned credits.Find out about the last five-year WOTC extension and start taking advantage of the WOTC program to achieve maximum tax savings.
Multi-Point & Lengthy Process
In accordance with the IRS, two initial steps of the WOTC process include completing the key document, IRS Form 8850 by the day the job offer is made and after the individual is hired.
Therefore, as an employer, you need to have your employees complete their portion of the IRS 8850 prior to accepting a job offer; while they are still in the application process.
Then, you complete your portion of the 8850 after the employee is hired, which means that tracking is very important for any company still screening for WOTC on paper.
The next step involves the Employment and Training Administration’s (ETA) Form 9061 or ETA Form 9062 if the employee has been conditionally certified as belonging to a WOTC target group by a state workforce agency, Vocational Rehabilitation agency, or another participating agency.
This means that upon hiring, the employee needs to complete the Individual Characteristics Form, but there are also sections that have to be completed by employers, such as company legal address, FEIN, starting title, starting wage, etc.
The final step is to submit the completed and signed IRS and ETA forms to a state workforce agency. Employers need to take into consideration that each state agency has its own submission methods and if the WOTC documents are not filed on time, the application for the tax credit will be denied.
On the other hand, with an electronic and paperless WOTC solution, this entire process is reduced to one step only, which entails completing an electronic or web Preliminary Information Request.
Once the system identifies someone that potentially qualifies for WOTC, Forms 8850 and 9061 are combined into an electronic WOTC Questionnaire, thus removing the need for applicants to be bothered more than once.
When the screening process is completed and there is a candidate identified as tax-credit-eligible, they are moved into the certification process. Your company has to get involved only to provide the necessary information.
After this, your HR team does not have to worry about a thing – the entire process is taken care of by submitting everything to the state and tracking the status of each application.
Finally, upon receiving a certification, you will be informed on how much your company can claim when you submit your corporate taxes.Use this comprehensive guide to find out how to effectively apply for WOTC and put an end to missed credit opportunities.
In a paper process environment, there is zero validation of what an applicant inputs. They could miss fields that are critical, complete portions that should not be completed, partially complete fields, and so on. The only way that an employer could get around this is by having their hiring team screen the forms for mistakes, taking up more of their valuable time.
Also, if there are mistakes on the forms, the consequences range from needing to complete or correct the forms to the application receiving a “denied” status from the state agency. At times the employer needs to appeal a denial in hopes of rectifying the compliance issue, which takes up even more of the hiring team’s time.
Furthermore, WOTC deals with applicants or new employees and, as such, no company wants to leave a bad impression on their newly found talent. Given that the process itself is voluntary, anything that can be done to make it seamless is critical to success.
Electronic WOTC Questionnaire has built-in validation asking your applicant to input critical information that the state agencies need. At the same time, the electronic questionnaire as part of the paperless WOTC process is designed to show only the relevant questions to the applicant and provides more white space with a minimalist look and feel.
This promotes compliance and simplicity while producing a progressive image of your company.
Storage, Retention and Tracking
When screening for WOTC and dealing with Form 8850, as an employer, you need to keep track of the 8850 in the event that someone who completed it, is hired. This creates more work and stress for the HR team, as failure to see their process through to completion results in a potential loss of revenue for your company.
Today, companies are likely to have multiple systems to handle their HR needs. Some portions of the hiring process may be on paper, while some are completed electronically. Having to navigate and deal with two distinct processes leads to further time spent and stress for your HR team.
In some situations, an applicant who is not hired for months after completing the WOTC application is required to complete the form again.
While the form itself is simple, this shows a lack of organization on your company’s part. Also, this point can be critical at times as some of the target groups may be dealing with very sensitive issues for individuals, such as being previously unemployed, receiving social security income, food stamps, or a felon, etc.
An applicant might be brave enough to be forthcoming with that information once, but it is questionable whether they would do it again.
On the other hand, an electronic solution keeps all your WOTC information on a cloud platform. It stores applicant Form 8850, Form 9061, supporting documents, e-mail correspondence, letters for the state agencies as well as certifications and denials from the state agencies all in one WOTC Management location.
Such effective paperless WOTC management results in increasing accuracy, high protection against any document loss, and the highest document storage security routines in the industry.
Through AWS-S3, any uploads and attachments via Lambda function are processed to clear documents for any viruses that may be embedded in the document. All documentation is version controlled with a complete history ensuring information is never lost or corrupted.
Therefore, all of the storage issues mentioned above disappear when you use a paperless WOTC solution as it stores, retains, and tracks WOTC applications for their full life cycle and through the retention period.
Paperless WOTC Solution
Your current process does not have to remain as complicated and costly as it is today. With an electronic WOTC solution, you can replace out-of-date and insecure paper routines that require significant resources both during the onboarding experience, as well as, during the administrative process.
The system easily combines the IRS 8850 and ETA 9061 virtually to create a seamless and efficient way for you to manage the WOTC process.
As an employer using a paperless WOTC solution, you are able to embed an intuitive and secure web link to easily determine WOTC eligibility while a dedicated support team perfects pre-screened eligible candidates on your behalf.
Significant advantages your company will experience include web-based mobile-optimized any time access, integrated tax credit calculation supported by our integrated payroll feed, algorithmic technology maximizing credit results and the user experience, technology validation ensures compliance, consolidated credits earned reporting, dedicated WOTC analysts to ensure all credits received and taken.
The best-of-class technology will surely impress your applicants with a technically savvy process that is seamless at the same time, and leave them with a favorable lasting impression of your company and not a cumbersome WOTC process.