Viewpoints
Are You Eligible for the Newly Expanded Work Opportunity Tax Credit?
Rick Doe
Originally Published In:
December 2007
Author: Richard J. Doe, Esq.
Did you hire any employees in the last 28 days? Are they between the ages of 18 and 40 and not related to you or any other owner? If you answered yes to both of these questions, your firm may be eligible for a tax credit from the IRS of up to $2,400 per new hire!
Under the newly expanded Work Opportunity Tax Credit, or WOTC, employers that hire certain individuals are eligible for this generous credit from the federal government. The WOTC was modified recently by H.R. 6111, the Tax Relief and Health Care Act of 2006. Section 105 and IRC 51 provides the information for the Work Opportunity Tax Credit program.
This credit is available to all types of employers; “C” Corporations, Partnerships, S-Corps, LLCs and other flow-through entities. You can reap this tax benefit, which can offset both regular and AMT tax, by simply hiring someone (or have hired someone in the last 28 days) that meets the age requirement, lives in a specific area and meets some other requirements.
The Work Opportunity Tax Credit was designed to promote the hiring of individuals who qualify as a member of a target group, while simultaneously providing a federal tax credit to employers who hire these individuals. Prior to the recent expansion, employers had to ask sensitive questions to new employees in order to qualify. Now, the employer need only ask the employees address.
The tax credit is still available, however, for hiring the following designated groups under WOTC:
- Qualified Recipients of Temporary Assistance to Needy Families (TANF)
- Qualified Veteran
- Qualified ex-felons hired no later than one year after conviction or release from prison
- High Risk Youth ages 18 through 24 residing in an Empowerment Zone or Renewal Community
- Vocational Rehabilitation referrals/Ticket-To-Work
- Qualified Summer Youth ages 16-17 who reside in an Empowerment Zone or Enterprise Community
- Qualified Food Stamp recipients ages 18-39
- Qualified recipients of Supplemental Security Income (SSI)
- Long – Term Family Assistance recipient
While eligibility is relatively easy to determine, capturing and actually receiving the credit is a bit more complicated. The requirements of certifying the employee with the State, completing various federal and state forms and documenting the number of hours each eligible employee works can be substantial. The Bonadio Group has had great success in getting large tax credits for employers. For example, we recently were able to get one of our clients over $20,000!
To capture this credit, it is prudent to employ the services of a qualified tax advisor that has the knowledge, resources and expertise to make sure that you receive the full benefit of this credit. They should have the resources and knowledge to properly conduct the research, determine if you are qualified for this credit, complete all the necessary paperwork and get you the full amount you are entitled to.
Disclaimer: The Bonadio Group provides the information in Viewpoints for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in Viewpoints are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
