Claiming WOTC Credits: Simple by Design
The Work Opportunity Tax Credit (WOTC) was designed with simplicity in mind.
Step 1: Complete two easy forms
Step 2: Make copies of applicant’s driver’s license and social security card
Step 3: Mail them off
Step 4: Wait for a certification to be mailed back to you!
Easy-peasy, right? The IRS even designed WOTC Form 8850 (the Pre-Screening Notice and Certification Request for the Work Opportunity Credit) to help you identify applicants during the hiring process who will qualify under WOTC and bring you the highest possible credits. By simply implementing the credit screening process outlined by the IRS (see Form 8850 instructions here) or advised by your tax credit advisor, you can begin counting your expected WOTC credits as early as the interview process.
Employers Leaving WOTC Credit Savings on the Table
Potential WOTC hiring credits should be a consideration in every hiring process. When choosing from a qualified applicant pool, selecting the applicants that will return maximum savings for your organization is a smart business decision that ultimately supports greater job creation. Why then, do so many employers close their eyes to the pre-qualifying questions on the WOTC Form 8850 and ignore this important savings opportunity during the hiring process?
In aiding employers as they integrate WOTC into their hiring process, I have found that employers’ apprehensions about inadvertently engaging in hiring discrimination is by far the biggest roadblock to their taking full advantage of the WOTC credit program. Many employers remain so apprehensive about inadvertently engaging in hiring discrimination that they decline to use the Form 8850 as it was intended, instead opting to include it in hiring packets only after a hiring decision has been made and hope by chance their new hire happens to be a target group member. Well, it turns out that they are called “target groups” for a reason, and we hope to encourage you to start aiming at target group members before you hire them on.
Don’t Fear WOTC: It Was Designed to Avoid Discriminatory Hiring!
Fear of becoming ensnared in the complex net of legal entanglements surrounding hiring practices can discourage employers who should feel free to leverage WOTC Form 8850 as a hiring tool. Employers are allowed –encouraged, even- under the law to identify eligible WOTC target group members during the hiring process. Let’s take a look at how employer protection from discrimination is built into the WOTC screening process.
First, the relevant law:
Section 2000e-2(a), Title VII of the Civil Rights Act of 1964, as later amended by the Civil Rights Act of 1991 and the Lily Ledbetter Fair Pay Act of 2009.
States that: “It shall be an unlawful employment practice for an employer- (1) to fail or refuse to hire…” based on race, color, religion, sex, and national origin.
At no point on the WOTC Form 8850 are applicants asked to disclose personal details relating to race, color, religion, sex, or national origin. The questions posed to job applicants on WOTC Form 8850 were written with the intent to steer employees clear of the unlawful practices outlined in Title VII. Furthermore, as the answers to these questions are meant to elucidate the background of an applicant only as far as their belonging to a WOTC Target Group is concerned, these answers can only ever be used to encourage the hiring of an individual and in no way lend themselves to an employer’s decision to “refuse to hire” an individual.
Instead of serving as a potential net in which employers might find themselves entangled, WOTC Form 8850 is actually a carefully crafted guide to lead employers through the pitfalls of hiring discrimination, and employers should rely on it as such in order to effectively maximize the WOTC credits available to them.
The Forms Don’t Lie!
Looking more closely at the Form itself, we find several instances that demonstrate even further that Form 8850 can be safely used as a hiring tool. One of the most familiar and onerous features (at least for employers befuddled by compliance issues) of the Form 8850 is the requirement that applicants must sign and date the form on or before the date of hire.
“Under penalties of perjury, I declare that I gave the above information to the employer on or before the day I was offered a job, and it is, to the best of my knowledge, true, correct, and complete” (IRS Form 8850).
This stipulation that an applicant complete Form 8850 on or before the date of hire makes Form 8850 a hiring tool regardless of an employer’s decision to effectively utilize it or not. When properly followed, the regulations governing WOTC and Form 8850 deliver to the employer an invaluable tool in forming a more complete profile of the candidates under their consideration- a profile which extends beyond the skills of an applicant and includes the possible credits to be collected under WOTC.
Use Form 8850 with Confidence and Watch Your WOTC Credits Grow!
In light of the intent and design of Form 8850 to protect and assist employers, those who remain reluctant to use it to inform their hiring decisions ultimately fail to maximize their available WOTC credits. What’s more, the perceived risk that accounts for these lost savings opportunities is only a myth. The perception that the Work Opportunity Tax Credit is plagued by potential hiring discrimination violations is one that has too often prevented employers from effectively utilizing the Form 8850 and maximizing their associated credits.
So the next time that fear of inadvertently engaging in hiring discrimination threatens to come between you and your hiring credits, we encourage you to remember that protections were built into the Form itself to allow employers like you to take full advantage of your available WOTC credits without fear of discrimination.
Download ETS’ WOTC brochure 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.