Five Myths about WOTC
Don't let Work Opportunity Tax Credit eligibility misconceptions keep you from realizing this powerful tax benefit! With WOTC now extended through 2019, it’s time for employers to take a new look at their eligibility for WOTC as well as the myths that have kept too many of them from filing.
IT TAKES TOO LONG TO RECEIVE BENEFITS
For a number of years, this was true. WOTC had to be renewed on an annual basis. Congress often delayed action on WOTC and other credits until at or even year-end, and they would implement them retroactively. At that point, businesses had to scramble to pull together information for the entire year, and the states, which process WOTC applications, would be flooded with a year’s worth of forms all at once. Delays were inevitable and often very lengthy. Now, however, with the WOTC extended for five years, businesses can file in real time, which will speed up processing at the state level significantly.
WE DON'T HIRE PEOPLE WHO QUALIFY
WOTC started life as the “Welfare to Work” program, and many employers still mistakenly believe that it is limited to welfare recipients. That’s not the case. WOTC applies to a number of categories of qualifiers including:
Unemployed Veterans (including disabled veterans)
Temporary Assistance for Needy Families (TANF) recipients
Supplemental Nutrition Assistance Programs (SNAP) recipients
Rural Communities residents (living in rural communities)
Vocational Rehabilitation referred individuals-
Supplemental Social Security Income (SSI) recipients
IT’S ILLEGAL TO ASK EMPLOYEES IF THEY QUALIFY
This is l, but not insurmountable, concern. Yes, asking applicants if they fall into some the egitimateWOTC categories during the hiring process would violate employment law, which is why companies work with outside vendors such as Swain Consulting to screen and process the applications. Most vendors use phones or online tools that allow employees to self-identify their classification. The vendors then process the necessary forms to acquire the certification that provides savings to you.
AS A FLOW-THROUGH ENTITY, WE WON’T QUALITY
WOTC is available to most entities, not just C corporations. Partnerships, S corporations, and other Flow-Through Entities are eligible. These general business credits can be applied against the alternative minimum tax and flow to K1’s.
PAPER SCREENING FOR EMPLOYEES DOESN’T WORK FOR US
Historically, in order to gather the requiredWOTC information and submit it to each state’s labor department, an employee was required to sign Form 8850, Pre-Screening Notice and Certification Request for Work Opportunity Tax Credit. We now have electronic filing available, making it easy to process the paperwork efficiently!
Swain Consulting, LLC
P.O. Box 36628 l Cincinnati, OH 45236
l 513-818-1753 ext 4