Learn how the Work Opportunity Tax Credit can help franchises hire and other workers. Approximately 370,000 veterans are unemployed, according to the U.S. Bureau of Labor Statistics. Adding a veteran to your staff not only helps reduce that staggering number, but also opens your franchise up to a world of opportunity. That’s where the Work Opportunity Tax Credit (WOTC) comes in. This underutilized tax benefit for hiring certain types of employees – like veterans – can boost your bot tom line. WOTC can reduce your federal income tax liability by up to $9,600 per veteran hired. With a bit of knowledge and the right tools, WOTC is a great way for you to give back to the veteran community and align your employees with your mission.
WHAT IS WOTC?
WOTC is a federal tax credit available to employers who hire veterans and individuals from certain targeted groups. If you’re an eligible employer, you can receive between $2,400 and $9,600 in tax credits per employee.
Created in 1996 and modified since, the goal of the program remains the same: to incentivize workplace diversity and facilitate access to good jobs for workers.
WOTC AND HIRING VETERANS
“The fact that a program like WOTC exists is such an amazing opportunity for the veteran community,” said Monty Heath, Navy SEAL and Director of Veterans in Business at PrimePay. “For veterans transitioning to civilian life, the job market can be extremely challenging. But knowing employers can get a little boost from fulfilling their desire to support our community is a win all around.”What makes a veteran a great hire? Veterans are mission-focused and accustomed to rapidly adapting to new skills and thinking under pressure. They also have a deep understanding of what it means to work on a team, which is essential for your franchise operation.
The 1RS explains that a ‘qualified veteran’ eligible for WOTC meets these requirements:
• A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least three months during the first year of employment. Maximum tax credit: $2,400.
• Unemployed for at least four weeks but less than six months in the one-year period ending on the hiring date. Maximum tax credit: $2,400.
• Unemployed for at least six months in the one-year period ending on the hire date. Maximum tax credit: $5,600.
• A disabled veteran entitled to compensation for a service- connected disability hired within one year of discharge or release from active duty. Maximum tax credit: $4,800. A disabled veteran entitled to compensation for a service connected disability who is unemployed for at least six months in the one-year period ending on the hire date. Maximum tax credit: $9,600.
Note that employees must work at least 120 hours in the first year of employment to receive the tax credit. Specifics on these criteria can be 99 found via the Internal Revenue Service.
BONUS: NOT JUST FOR VETERANS
WOTC is also good for businesses that hire hourly workers. It is estimated that up to 20 percent of all hourly workers hired today are WOTC-eligible.
According to the 1RS, the individuals in these groups consistently face barriers when it comes to employment. In addition to qualified veterans, other eligible target groups include: summer youth employees, SNAP recipients, long-term family assistance recipients and more.
ADMINISTRATIVE REQUIREMENTS FOR WOTC
Admittedly, the administrative burden for WOTC is a huge reason why more employers don’t take advantage. Prescreening, application and validation must be completed through state workforce agencies before you can receive any tax credits. First, you must submit w the prescreening notice form within 28 days of the employee’s start date.
Here are some other forms necessary to complete the WOTC process.
• ETA Form 9061 – Individual Characteristics Form (supplement to Form 8850).
• ETA Form 9062 – Conditional Certification Form (candidates may present form during recruiting or hiring process which means they are tentatively eligible for a WOTC target group). Veteran candidates are encouraged to secure this form as they pursue employment and communicate their WOTC eligibility to prospective employers.
• 1RS Form 5884 – Form prepared and submitted to 1RS through year-end tax return. As you can imagine all this paperwork takes a lot of time, which often makes employers question if it’s even worth it. It is worth it – when you use the right technology.
WOTC administration doesn’t have to be an insurmountable burden. Simply identify candidates before you hire and automate the process. To make life easier for franchisors, there are recruiting and hiring platforms that automate the employee screening process and integrate the entire WOTC application and validation process from start to finish. The PrimePay platform automates the applicant tracking, employee onboarding and WOTC process, and adds a year-end tax packet to simplify the work for CPAs adding tax credits to employer tax returns.
“Adding these capabilities enables our clients to take control of their recruiting methods and significantly improve the hiring process,” said PrimePay CEO Bill Pellicano. If commitment, dedication and passion are characteristics you’d welcome in your franchise employees, then it’s time you consider hiring from the veteran community. And don’t miss out on the bonus of reducing your tax liability.
Todd Quarfot is the Chief Business Development Officer at PrimePay and executive sponsor of PrimePay’s Veterans in Business initiative. Learn more at franchise.org/primepay-supplier