The Work Opportunity Tax Credit - Part 1
Updated: Jan 4
Part 1 of our series on the Work Opportunity Tax Credit:
- What is WOTC (Work Opportunity Tax Credit)?
* The Work Opportunity Tax Credit, or WOTC, is a general business credit that is jointly administered by the Internal Revenue Service (IRS) and the Department of Labor (DOL). The Work Opportunity Tax Credit is available for wages paid to certain individuals who begin work on or before December 31, 2025. WOTC may be claimed by any employer that hires and pays or incurs wages to certain individuals who are certified by a designated local agency (sometimes referred to as a state workforce agency) as being a member of one of 10 targeted groups. In general, WOTC is equal to 40% of up to $6,000 of wages paid to, or incurred on behalf of, an individual who:
- is in their first year of employment;
- is certified as being a member of a targeted group; and
- performs at least 400 hours of services for that employer.
Thus, the maximum tax credit is generally $2,400. A 25% rate applies to wages for individuals who perform fewer than 400 but at least 120 hours of service for the employer. Up to $24,000 in wages may be taken into account in determining WOTC for certain qualified veterans. An employer cannot claim WOTC for employees who are rehired. In general, taxable employers may carry the current year’s unused WOTC back one year and then forward 20 years.
Next....can Tax-Exempt employers benefit from WOTC? 😉