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How can a business benefit from the Work Opportunity Tax Credit (WOTC)?

6/14/2021

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Small Business Tax Credit

https://ramlcpa.link/business-wotc-4c43
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You can claim the potentially lucrative federal Work Opportunity Tax Credit (WOTC) for some of the wages paid to the individual who is part of a targeted group.
 
Here’s what you need to know to make the WOTC a tax saver for your business
 
WOTC Basics
The credit generally equals 40 percent of qualified first-year wages paid to an eligible employee, up to a maximum wage amount of $6,000.
The maximum credit is $2,400 (40 percent x $6,000).
 
The credit is reduced to 25 percent of qualified first-year wages for an employee who completes at least 120 but fewer than 400 hours of service.
In this situation the maximum credit is $1,500 (25 percent x $6,000).
 
You can claim the WOTC only if you hire a member of a targeted group. Targeted groups include the following:
  • Qualified IV-A recipients
  • Qualified veterans
  • Qualified ex-felons
  • Designated community residents
  • Vocational rehabilitation referrals
  • Qualified summer youth employees
  • Qualified supplemental nutrition assistance benefits recipients
  • Qualified SSI recipients (anyone who is certified by the designated local agency as receiving Supplemental Security Income benefits under Title XVI of the Social Security Act for any month ending within the 60-day period ending on the hiring date)
  • Long-term family assistance recipients
  • Qualified long-term unemployment recipients
 
This link contains links to the names, addresses, phone and fax numbers, and email addresses of the WOTC coordinators for each of the SWAs.
 
Exceptions to the General Rule on Credits

There’s a higher limit of $12,000 for first-year wages paid to a qualified veteran who is entitled to compensation for a service-connected disability and was discharged or released from the military within the past year.
  • The maximum credit is $4,800 (40 percent x $12,000).
 
There’s an even higher limit of $14,000 for first-year wages paid to a qualified veteran who was unemployed for at least six months in the prior year.
  • The maximum credit is $5,600 (40 percent x $14,000).
 
If a qualified veteran both has a service-connected disability and was unemployed for at least six months in the prior year, the limit for first-year wages is $24,000.
  • The maximum credit is $9,600 (40 percent x $24,000).
 
The WOTC for a long-term family assistance recipient equals 40 percent of qualified first-year wages, up to a maximum wage amount of $10,000.
  • ​The maximum credit is $4,000 (40 percent x $10,000). 

In addition, for long-term family assistance recipients, the WOTC can be claimed for 50 percent of qualified second-year wages, up to a maximum wage amount of $10,000.
  • The maximum second-year credit is $5,000 (50 percent x $10,000) and a maximum combined credit for the two years of $9,000 ($4,000 + $5,000).
 
The WOTC for a qualified summer youth employee (a 16-year-old or 17-year-old who lives in an empowerment zone) equals 40 percent of first-year wages paid during any 90-day period between May 1 and September 15, up to a maximum wage amount of $3,000.
  • The maximum credit is $1,200 (40 percent x $3,000).

​If you would like my help with the WOTC, please don’t hesitate to contact us at info@ramlcpa.com​.

Business Tax Credit

Work Opportunity Tax Credit

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COLUMBIA MD ACCOUNTANT

Travis Raml, CPA & Associates, LLC is an accounting firm in Columbia MD which offers, tax services, outsourced CFO, outsourced controller, businesses advisory, and coaching services to businesses and individuals thorough out the Greater Washington, DC and Baltimore, MD area.

​We also provide service in Ellicott City, Columbia, Annapolis, Severn, Odenton, Crofton, Silver Spring, Rockville, Bethesda, Gaithersburg, Potomac, Reston, Tysons Corner, Fairfax, Alexandria, Arlington. We're also a local CPA firm conveniently located in Columbia Maryland directly across from Columbia Mall.
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Travis Raml, CPA has been an accountant since 1998 and a certified public accountant (CPA) since 2003 and prides his firm on delivering high quality small business CPA services. He specializes in Columbia Tax Preparation, and Columbia Maryland Accounting Firm.


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