The Work Opportunity Tax Credit, commonly known as WOTC (like Yahtzee, but with a “W”), is an incentive for small business owners to hire certain types of employees and eliminate barriers that certain individuals face when seeking employment.

Employers are eligible to receive a tax credit for nine categories when hiring a new employee for the business:

• Veterans
• TANF Recipients (Temporary Assistance for Needy Families)
• SNAP (food stamp) Recipients
• Designated Community Residents
• Vocational Rehabilitation Referral (see below about partnerships)
• Ex-Felons
• Supplemental Security Income Recipients
• Summer Youth Employee
• Qualified Long-Term Unemployment Recipient

(For full descriptions, see WOTC)

Generally, the credits range anywhere from $1,200 – $9,600 per employee who works a minimum of 120 hours (which is only 3 full-time weeks, by the way), and the employers receive the funds as a Federal Income Tax credit, which can be applied back one year and forward for up to twenty years!

It sounds too good to be true, right? Well, to put it simply, it’s quite tough to track and fill out all of those lovely IRS forms — not to mention the fact that employers aren’t really supposed to ask certain questions in interviews in order to stay compliant.

Sounds like a headache.

Most small business owners assume that their new hires won’t qualify, they’re afraid they’ll ask the wrong questions, or they have no clue about how to receive the credit, so they just let it pass them by. They don’t realize that an average of 30% of new hires actually do qualify for the business to receive one of these credits.

It’s just too time-consuming, too stressful, too walk-the-line of overstepping and facing a lawsuit for employment discrimination.

Here’s a secret: Partnership.

Partnerships with local organizations can help your community and your business.

• Look up your local Vocational Rehabilitation Services office (DVRS) and ask about how they can help you with job placements for individuals with disabilities or how they can perform on-site disability awareness training for your company.
• Find out if your local homeless shelters do job training or develop a program at your business that integrates an internship with these community organizations.
• Connect with a local youth program that works with teenagers to offer positions if you own a coffee or ice cream shop that’s busier during the summer (programs like Big Brothers Big Sisters — BBBS — are a great place to start).
• Find your local VA office (Veterans Affairs) and see if they help with job placement for veterans in the community.

Paychex offers a program to its clients that tracks this credit at no cost if they are utilizing payroll services — business owners don’t have to worry about surveying new hires to see if they qualify, because it’s done via phone or email and kept confidential. At year-end, the business receives thousands of dollars in credits, and pays a small commission fee.

Small business owners are getting paid to partner with their community: it’s a win-win!

Abigail Lind is a business solutions sales consultant at Paychex.  Reach her at alind@paychex.com or 336.804.2375.

Government Publication and More Information: WOTC Brochure