The Work Opportunity Tax Credit (WOTC) was designed with simplicity in mind.
- Complete two easy forms,
- Make copies of applicant’s driver’s license and social security card,
- Mail them off, and
- Wait for a certification to be mailed back to you.
Claiming WOTC Credits – Simple by Design
The IRS designed WOTC Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to help employers identify applicants during the hiring process who will qualify under WOTC and bring them the highest possible credits. By simply implementing the credit screening process outlined by the IRS or advised by a tax credit advisor, employers can begin counting 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. However, 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.
Employers’ apprehensions about inadvertently engaging in hiring discrimination can be a big 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. Yet, target groups exist for a reason and employers should start aiming at their members before they hire them.
WOTC – 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, even encouraged, under the law to identify eligible WOTC target group members during the hiring process and employer protection from discrimination is built into the WOTC screening process.
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 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.Find out how to effectively apply for WOTC, reduce federal tax liability and save up money for investing elsewhere with this detailed guide on WOTC program.
Looking more closely at the Form itself, there are 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 Form 8850 is the requirement that applicants must sign and date the form on or before the date of hire.
The stipulation that an applicant completes WOTC 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 that extends beyond the skills of an applicant and includes the possible credits to be collected under WOTC.
Use Form 8850 with Confidence to Watch 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 WOTC Form 8850 and maximizing their associated credits.
So, the next time that fear of inadvertently engaging in hiring discrimination threatens to come between employers and hiring credits, they are encouraged to remember that protections were built into the form itself to allow employers to take full advantage of available WOTC credits without fear of discrimination.
Overcoming WOTC Misconceptions
The hiring and onboarding of employees is often a time-consuming procedure for both applicants and employers. Tax-credit screening, document collection, background checks, and employment verification are all components that take up a lot of time and resources. However, all of this together with the possibility of employment discrimination can be solved with today’s technology. Adopting an automated WOTC process can save time and money while increasing employers’ ability to benefit from this tax incentive.
There are challenges that employers can meet when applying for WOTC, but the benefits they can gain are much more significant, especially with an electronic solution that ensures efficient capture of available tax credits and reduces the risk of hiring discrimination.
Editor’s Note: This post has been updated for accuracy and comprehensiveness.