The amount of taxes a business owes may be significantly impacted by making use of tax credits. When hiring new employees, businesses may get up to $9,600 in tax credits from the federal government by taking advantage of the Work Opportunity Tax Credit (WOTC). Read this post if you think your business may benefit from paying less in taxes. To potentially save hundreds of dollars when filing your taxes, find out who qualifies, how to apply for the credits, and what you need to do right now.
Can You Explain How the WOTC Helps?
Employers that hire members of certain underrepresented groups who have faced insurmountable barriers to work may be eligible for tax credits under the Work Opportunity Tax Credit (wotc meaning) programme. This is due to a lack of representation of these groups at higher levels of employment.
To help employees of certain demographics lessen their reliance on welfare and other types of government assistance, Congress enacted the Work Opportunity Tax Credit (WOTC). The ultimate goal is for these people to reach a position where they can support themselves financially and contribute to society. Additionally, businesses who take part would be able to potentially reduce their yearly income tax bill.
The Work Opportunity Tax Credit is available to those who qualify.
If your company hires persons from specified groups that are statistically more likely to face significant employment hurdles, you may be eligible for a Work Opportunity Tax Credit (WOTC). A company’s eligibility to claim the credit depends on a number of parameters, including as the percentage of qualifying employees, the wages paid to those employees in their first year on the job, and the total number of hours worked by such employees.
When trying to figure out whether you qualify for the Work Opportunity Tax Credit, where do you even start?
If a business hires a qualified employee from a designated group throughout the year, the business may be eligible for a federal tax credit at the end of the year. Both the number of hours worked and the total amount of money earned during the first year of employment will go towards the final credit amount.
The employer may claim a federal tax credit equal to 25% of the employee’s first year wage, up to the maximum amount that can be claimed for the credit, if the employee works at least 120 hours in their first year on the job.
Employers may get a tax credit equal to 40% of an employee’s first year wage (up to the maximum allowable for the credit) if they hire someone who works at least 400 hours in their first year.
Conclusion
A worker in the Temporary Assistance for Needy Families (TANF) priority population must meet a certain set of criteria in order to qualify for a Work Opportunity Tax Credit (WOTC). In order to hire from this pool, companies must have at least one employee who has been with the company for at least 24 consecutive months.
