Overview of the WOTC

WOTC is a federal credit for employers who decide to hire workers from certain targeted groups. These targeted groups include the following types of workers. 

• Someone who is part of a family that receives Temporary Assistance for Needy Families
• Ex-felons 
• A recipient of long-term unemployment 
• Former veterans 
• An individual from a family that has received long-term government assistance
• Someone between the ages of 18 and 40 who is a resident of a Rural Renewal County (RRC) or an Empowerment Zone (EZ)
• A vocational rehabilitation referral 
• A worker who gets Supplemental Security Income

These categories can be challenging to classify, which is why many companies use HR providers to review new hires and look for employees who are eligible for the WOTC.

Most employers in the United States have workers who qualify for tax credits, but many companies aren’t taking all the credits they deserve. In a recent Mission to Grow podcast, Shannon Scott, the CEO at HR Logics, dived into the current state of employment tax credits in the United States. “About 30 to 35% of all new hires that are in the United States right now are typically eligible for an employer to take these credits,” Scott said. 

The biggest issue with these credits is that employers aren’t taking them when they’re eligible for them. Often, CPAs and other professionals aren’t trained on the ins and outs of the WOTC and other credits, which means they aren’t comfortable suggesting these credits to clients. If one of your workers does qualify for this credit, you can get up to $9,600 back. 

What Is a WOTC Certification Request?

After a new hire joins your company, you have only 28 days to file a WOTC certification request. As an employer, you can submit IRS Form 8850 with either ETA Form 9062 or ETA Form 9061 to your state workforce agency. While each state has different procedures, the form will be the same. 

Once you turn in the form, it will be up to the state to determine whether the employee is eligible for the WOTC or not. Then, you can use the state’s determination to apply for the WOTC when you file your annual tax return.    

Information Included on the WOTC Forms

The type of information gathered varies based on the form you’re filing. If you want to reduce your company’s administrative burden, you can always outsource these types of HR processes and tax forms to an outside HR provider. 

Form 5884: This form is used to claim the WOTC. It shows the first-year and second-year wages you paid and how to use these figures to calculate your credit.  

Form 8850: Companies must give Form 8850 to their new hires and have them fill out the questionnaire on the first page to see if they qualify. The second page includes basic information, like the employer’s location and name, that is filled out by the employer.

Form 9061: Employers submit this form with Form 8850 to their State Workforce Agency (SWA) along with Form 8850. Then, the SWA uses the information to verify your worker’s eligibility for the WOTC. 

Form 9062: With Form 9062, the SWA can pre-determine whether an applicant is eligible for the WOTC or not. 

The Process for Submitting a WOTC Certification Request

The entire process for submitting a WOTC certification request begins when you hire someone who is eligible for this credit. While your state will carry out a large part of the process, it is up to you or your HR company to make sure everything is submitted on time and filed properly. 

1. Locate WOTC-Eligible Workers: The first step is finding someone who is eligible for the WOTC. Depending on the state you live in, you can find these workers through a rehabilitation services division, vocational rehabilitation services, or a similar program.
2. Screen Your Applicants: When people apply for a potential position, ask them to fill out the questionnaire on the initial page of Form 8850. Because some of these questions may indicate protected classes, you may want to outsource the pre-screening process to an HR or payroll provider. This screening is entirely voluntary, so it’s important to make sure applicants and hiring managers know that no one is required to fill it out. 
3. Submit Form 8850: Form 8850 is also known as the Pre-Screening Notice and Certification Request for the WOTC. You must submit this form within 28 days of when you hired the WOTC-eligible worker. This form is sent to your SWA. You must also submit ETA Form 9061 or 9062 at the same time. 
4. Track Work Hours: To qualify for the WOTC, the employee must work a minimum number of hours. Typically, the worker must perform at least 400 hours of services to qualify for a 40% credit.   
5. Get Your Credit: Once you have completed the rest of the process, you can file Form 5884 to get your credit when you file the rest of your tax return.

Because the WOTC is certified by an SWA, there are generally very few problems with companies filing for credits they shouldn’t get. However, it’s important to carefully maintain all of your records so that you can easily support getting the WOTC on your tax return if you are ever audited. 

Why Do You Need to Turn in a WOTC Certification Request?

Without a WOTC certification from your SWA, you can’t add the WOTC to your tax return. Part of the process of getting this tax credit involves going through the state’s certification process. If you don’t meet this requirement, you can’t get the credit. 

Fortunately, this means that businesses are less likely to make mistakes about whether they are qualified for this credit or not. Because the WOTC certification happens by the SWA before you can apply for the WOTC, very few credits are given incorrectly. 

Prepare for Filing Your WOTC Today 

As an employer, you can use the pre-screening notice to find out which employees are eligible for the WOTC. Then, you must send in a WOTC certification request to your SWA before you can officially get the WOTC. By turning in all of these forms on time, you can reduce your organization’s tax burden while helping local workers who struggle to find employment opportunities. 

If you need more information about getting the WOTC and screening your workers, we can help. Reach out to Asure’s team of small business payroll and HR experts today to find out more information.