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What is the WOTC Optimization Program?

Learn about the Work Opportunity Tax Credit

What is WOTC?
WOTC Optimization Program

If you find yourself asking, “What is WOTC?”, you’ve come to the right place. 

WOTC stands for the Work Opportunity Tax Credit. It is a federal program available to employers large and small. Enacted in 1996, the program encourages businesses to hire targeted groups of workers who have historically struggled to find employment.

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How does the WOTC Optimization Program work?

WOTC helps transform government dependent people into self-sufficient workers while they earn a steady income and become contributing taxpayers. At the same time, WOTC incentivizes diversity in the workplace and facilitates access to good jobs for American workers. In exchange for hiring from these targeted groups, employers are able to significantly reduce their income tax liability.

What businesses will benefit from WOTC?

Organizations and companies in industries such as temporary staffing, transportation, warehousing, manufacturing, distribution, retail, food service and healthcare (as well as other businesses which rely on an hourly-wage and entry-level workforce) are well suited to benefit from WOTC because of the nature of a higher turn-over rate for their industries. The credit represents a permanent reduction in income tax and directly reduces a business’s effective tax rate. By leveraging this tax credit, your business will increase profits and obtain additional cash flow. There is no limit to the amount of credit available through the program as a whole or to a single employer.

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How large is the tax credit?

Tax credits range from $1,200 to $9,600 (maximum), depending on which target group the new employee identifies with. Today, businesses can electronically screen all new hires to determine WOTC eligibility which drastically decreases your time commitment with this program. Whether your company hires “blue-collar” or “white-collar” employees, you may be missing out on valuable tax credits that will help increase your bottom line.

Who are in these Target Groups?

Employees who fit into one of the following groups are employees which will provide help you benefit from WOTC:

  • Unemployed veterans (including disabled verterans)
  • TANF (Temporary Assistance for Needy Families) recipients
  • SNAP (Food Stamp) recipients
  • Designated community residents (living in Empowerment Zones or Rural Renewal Counties)
  • Vocational rehabilitation referral
  • Ex-felons
  • Supplemental security income recipients
  • Summer youth employee (living in Empowerment Zones)

For more details about these target groups, visit the US DOL website.