Important Hiring Incentive
Employment tax credits, such as the Work Opportunity Tax Credit (WOTC), can be extremely lucrative for employers who meet the criteria, especially upon streamlining WOTC and learning how to realize the full potential of this tax incentive. As a federal tax credit program open to all employers, WOTC is designed to encourage businesses to hire individuals from certain targeted groups, who have traditionally faced barriers to employment.
WOTC credits range between $2,400 and $9,600 for each qualified new employee, thus providing companies with possibility to earn thousands of dollars. These dollar-for-dollar credits may reduce federal income tax and may even be carried forward if a company is unable to use them in the current year.
The tax credit is equal to 25% or 40% of a new employee’s first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.
Despite being a program that provides incentives to employers who hire groups that may struggle to find work elsewhere, many companies do not take advantage of the WOTC program due to shifting regulation and labor intensive administration that can make it difficult to realize its full benefits. Deadlines can cause applying for WOTC to be an extremely overwhelming process as well as identifying new hires that qualify.
Not using incentives such as WOTC means that companies are wasting an excellent opportunity to save money. With this program in place, organizations reduce their federal tax liability and increase cash flow. As a result, WOTC can help employers make their companies more profitable by having an impact on their bottom-line and enabling them to improve their margins and sustainability.
WOTC has specific target groups which it uses to incentivize employers to help get historically underemployed populations back to work. Therefore, it has multiple benefits not only for employers, but also for employees who are eager for the opportunity to rejoin the workforce and contribute to their communities and families.
Furthermore, WOTC leads to significant savings for the government and taxpayers by getting more people off of public assistance and reducing the federal benefits that would otherwise be paid.Learn about different WOTC benefits and what steps to take in order to take advantage of this program by using this comprehensive guide.
Overcoming WOTC Challenges
Many companies are not too eager to bother with WOTC because of the time it takes to apply. Filling out forms, sending in paperwork, and waiting for a response requires resources that many organizations do not want to invest. In addition to this, using traditional methods for WOTC administration causes this complicated process to be even more labor intensive and error ridden, making it difficult for companies to submit the necessary documents within the 28-day period required by the IRS.
Filling out and tracking paperwork can seem to be a daunting task, especially for companies with a large number of new hires. However, participation in WOTC program can become simple and straightforward as a result of streamlining WOTC and replacing manual process with a software service.
Successful WOTC program begins with identifying all eligible employees to reach screening completion and, in order to do this, employers need a simple process that can be applied consistently for every new hire. Automating the onboarding process together with WOTC screening and processing is considerably more efficient because it removes the time consuming burden of identifying and processing credits, and allows businesses to reduce the demands on their staff while ensuring they receive maximum savings.
Streamlining WOTC allows employers to:
- Ensure maximum savings for their business with the use of an automated tool that simplifies WOTC processing and keeps up with changing regulations;
- Remove the burden of identifying and processing the credits by automated screening of each new hire;
- Make the WOTC process streamlined and organized with the use of E-signature;
- Obtain information at all times by accessing data that is securely stored online.
Streamlining WOTC and Turning It to Your Advantage
Since its inception in 1996, the WOTC Program has evolved into a successful tool for encouraging job creation and retention. Employers of all sizes are eligible for WOTC tax credits and there is no limit to how much companies can earn in WOTC tax credits. Despite of this, many employers are not taking advantage of this incentive and they are definitely missing out because it is easier now more than ever to take part in programs such as WOTC.
One of the reasons why employers avoid participating in WOTC may be the inefficiencies related to manual processes that increase the error rate and time to complete the necessary documentation, which ultimately leads to missed opportunities and, in many cases, missed WOTC credits. However, with the use of advancements in automation, digitization, and electronic exchanges of data, companies can significantly enhance tax credit savings. Due to streamlining WOTC process, companies create an opportunity to efficiently capture and realize the WOTC credits they are eligible for, while maintaining compliance with new and changing regulations.
Participation in WOTC can be a simple and easy way to save money that can be used for additional hiring, training, and investment. This program provides a great benefit to businesses, the government and economy as a whole and, more importantly, makes a huge impact on members of target groups. In order to enhance their WOTC strategy, employers need to be aware both of the challenges they may face and benefits they can gain, and learn how to maximize the potential tax credit available thanks to streamlining WOTC.Learn how you can reduce tax liability, increase cash flow, and take advantage of this tax incentive without compromising time of your internal administration office.