Mar 21, 2023

Is Your Staffing Agency Missing Out on Tax Incentives? Understanding Work Opportunity Tax Credits

 

image of paperwork with text saying "WOTC and Tax Credits"

Tax credits are important resources for staffing companies, but it can be overwhelming figuring out how to take advantage of them. One of the most overlooked tax credits for businesses is the Work Opportunity Tax Credit (WOTC).

Tracking eligibility for these tax credits can require extensive resources for a business, including time and paperwork. That’s why TempWorks works closely with our tax credit integration partners, helping our clients maximize their tax incentives.

Learn more about these tax credits and how your company can benefit from them.


 

What is WOTC? And how can WOTC benefit my staffing agency?

The Work Opportunity Tax Credit—or WOTC—is a federal tax benefit available to employers who hire workers facing barriers to employment, such as military veterans. When businesses claim this tax credit, their federal tax liability is reduced, resulting in significant savings.

WOTC incentivizes employers to hire job candidates from traditionally marginalized backgrounds, and it can also lead to increased diversity in the workforce.

How much is the WOTC tax credit?

Businesses claiming the work opportunity tax credit can earn up to $9,600 per qualified new hire. This amount will be determined by the employee’s wages and the tax liability of your business. On average, employers receive a tax credit of about $2,400 for each eligible new employee.

Which employees are eligible for the work opportunity tax credit?

The good news is that you are most likely already hiring eligible workers. On average, about 20-30% of employees are eligible.

To receive WOTC, employers can hire from the following targeted groups:

  • Qualified IV-A recipients: individuals from families receiving certain federal assistance
  • Qualified veterans
  • Qualified ex-felons
  • Designated community residents (DCR): this refers to individuals living in communities that are struggling economically
  • Vocational rehabilitation referrals: people with disabilities who have competed—or are currently completing—rehabilitation
  • Qualified summer youth employees
  • Qualified Supplemental Nutrition Assistance Program (SNAP) benefit recipients
  • Qualified supplemental security income (SSI) recipients
  • Long-term family assistance recipients
  • Qualified long-term unemployment recipients

Why do staffing agencies miss out on their tax credits?

There are several barriers that prevent businesses from taking full advantage of their available tax credits.

  • The lengthy time commitment
  • The need for tedious paperwork and recordkeeping
  • Assuming their employees won’t meet eligibility requirements
  • Thinking that their staffing agency will not qualify
  • An extensive onboarding processes, which prevent employees from filling out necessary surveys

For an employer to receive a tax credit, the employee must fill out a voluntary WOTC eligibility survey. The challenge? With the large amount of paperwork employees file during the onboarding process, job candidates will often skip optional items such as the WOTC survey. This prevents your business from receiving tax credits from the employees you hire.

Don’t turn away from possible tax credits. Before you assume that your agency—or the employees you serve—won’t be eligible for WOTC, it’s worth it to have an outside source help you determine your eligibility. That’s where TempWorks and our integration partners come in.

How TempWorks and Our Tax Credit Partners Can Help

TempWorks partners with our tax credit integration partners to help you maximize your tax credit benefits. When you work with one of our partners, their functionality is embedded directly within TempWorks. Forget the extra paperwork; these integrations save your team valuable resources while improving response rate, leading to significantly higher tax credit savings.

How do I get started?

Ready to start saving? Contact your account manager to learn more.

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