Summer Hiring and the Work Opportunity Tax Credit
While summer can be a time for some businesses to relax a bit on the hiring front, there are seasonal industries where the need for additional employees picks up in the warmer months. From construction to tourism to agriculture and groundskeeping, if your business is expanding its team, bringing on additional help this summer, or is beginning to ramp up for Fall, you might want to be aware of The Work Opportunity Tax Credit (WOTC).
Recently extended through December 2019, the WOTC could make your small business eligible for tax credits as long as you hire workers from certain groups of people the government identifies as having major barriers to employment. In addition, long-term unemployment benefit recipients who have been unemployed at least 27 weeks were added to the list of target groups with unemployment barriers.
WOTC Target Groups
Currently, the nine eligible groups that are part of the WOTC include:
- Long-term Temporary Assistance for Needy Families (TANF) recipients (18 months)
- Short-term Temporary Assistance for Needy Families (TANF) recipients (9 months)
- Unemployed veterans, including disabled veterans
- Designated community residents living in empowerment zones or rural renewal counties
- Food stamp (SNAP) recipients
- Vocational rehabilitation referrals
- Supplemental Security Income (SSI) recipients
- Long-term unemployment recipients
Department of Labor:
Certification criteria for the WOTC target groups
What is the WOTC?
In most cases, the credit for someone working at least 120 hours during the year equals 25 percent of their first-year wages up to $6,000, for a maximum credit of $1,500. If the employee works at least 400 hours, the credit jumps to 40 percent of first-year wages up to $6,000, for a $2,400 maximum.
The credit amount can be even higher for hiring military veterans. The maximum may reach as high as $9,600 for hiring a veteran with a disability.
Keep in mind the special rules for hiring young people to work during the summer. The WOTC can be claimed for hiring individuals aged 16 or 17 who reside in an empowerment zone or enterprise community. For work performed between May 1 and Sept. 15, the credit generally equals 25 percent of first-year wages up to $3,000, for a maximum of $750. But if the individual works 400 hours or more, the credit increases to 40 percent of first-year wages up to $3,000, for a $1,200 maximum.
Excluded Groups or Individuals
Former employees, majority owners of the employer, and the employers’ relatives and dependents are do not qualify for the QOTC, even if the individual meets the above eligibility criteria. Consult with your CPA to maximize your tax credits this summer and throughout the year.
To qualify for the WOTC, workers must be certified by the appropriate state authority. Give Abacus Payroll, Inc. or Alloy Silverstein Accountants and Advisors a call for details.
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The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.