Work Opportunity Tax Credit (WOTC)

Work Opportunity Tax Credit (WOTC)

The Work Opportunity Tax Credit (WOTC) is a federal tax credit that incentivizes employers to hire individuals from certain targeted groups who face significant barriers to employment.

The credit allows employers to reduce their federal income tax liability by a percentage of the qualified wages paid to eligible employees. The targeted groups include veterans, individuals receiving public assistance, and those with disabilities, among others. The amount of the credit can vary based on the employee’s classification and the length of their employment. For instance, if an employer hires a qualified veteran, they may receive a credit of up to $9,600, depending on the veteran’s circumstances and the wages paid.

To claim the credit, employers must complete IRS Form 8850 and submit it to their state workforce agency, typically within 28 days of the new employee’s start date.