Is the WOTC Program Worth it?

Published: July 7, 2023 by Tim Cate

The WOTC program can enhance your workforce and save your organization money with tax credits. Here’s how to make it easier to claim.

The Work Opportunity Tax Credit (WOTC) is a federal tax credit program created to provide an incentive for businesses to facilitate access to employment for American workers, especially those from disadvantaged groups. The program benefits employers as well as employees – offering enhanced job opportunities to disadvantaged employment candidates and providing significant financial savings to the employer, which can be used for further candidate outreach, to offset training costs or other business needs. It is surprising that, decades after the program’s introduction and with so many clear signs of its efficiency, many employers are still hesitant to fully explore the WOTC program and continue to question its benefits. There are many reasons why it is a good time to start pursuing the Work Opportunity Tax Credit and stop leaving the free money on the table.

WOTC Helps Expand Hiring Pool

Businesses can capture WOTC with every eligible candidate who meets the criteria of one or more WOTC target groups. In certain industries such as service, retail, hospitality, transportation, or construction, expanding the hiring pool through the WOTC comes naturally. Yet, there is no reason for other businesses not to benefit from WOTC.

Applying for the Work Opportunity Tax Credit with No Limits

Given the diversification of today’s workforce and the expanded nature of eligible WOTC groups, there is a high likelihood that most companies receive applications from candidates who meet the WOTC eligibility criteria. The number of qualified applicants increased after the pandemic and is estimated that between 20-25% of all job seekers fall into any of the WOTC categories.

The good news for employers is that there is no limit to the number of candidates who meet WOTC eligibility who can be hired. It is important that the WOTC program is administered in a manner compliant with the statutory requirements, but when this is done, companies can hire as many WOTC-eligible employees as they like

Screening for WOTC Eligibility Without the Hassle

Another reason employers often cite explaining their reluctance to utilize this program is the perception of it being overly burdensome and requiring an onerous amount of administration. There are also worries that candidates may not be comfortable providing information about their potential eligibility for the program.

When it comes to WOTC, the questions to screen candidates can be incorporated into the hiring process in a streamlined way, with the required government forms generated automatically incorporating the responses. In this manner, the process becomes much more efficient and does not require intervention or assistance from the company’s hiring team.

The Department of Labor (DOL) has also specifically provided guidance that participating in WOTC screening does not violate discriminatory hiring laws. Because WOTC-eligible candidates often know there is an incentive to businesses for hiring them, and because more and more companies are participating in the program, there is a lower rate of opt-out by candidates. Prospective employees are becoming more comfortable at responding to the WOTC screening questions.

WOTC Benefit Can Be Significant

Depending on eligibility category, hours worked, and wages paid, an employer can secure a tax credit of up to $9,600 per hire. Whether you are a small or medium-sized business or an industry giant, this amount in credit savings is bound to make a difference and greatly impact a company’s financial situation. In today’s business environment, companies of all sizes are looking for ways to save money and improve the bottom line, and WOTC can provide immediate returns. Participating in WOTC can drive financial savings to an organization, and studies by Peter Cappelli, Wharton School professor and economic researcher, indicates that it is among the most successful labor market policies enacted by Congress.

The Work Opportunity Tax Credit program is designed to enhance employment opportunities for individuals who have a more difficult time finding and maintaining employment. Accordingly, companies participating in this program are fulfilling the intent and desire of Congress and the DOL with this job program, and driving significant savings back to their shareholders.

High Potential Returns Relative to Effort

The current WOTC legislation has been authorized through December 2025, and will likely be extended beyond then given the strong bi-partisan support for the program. Given the financial returns, the ease with which companies can pursue WOTC, and the societal benefits of the program, businesses who are not participating in the program should strongly consider implementing a process to do so.

The administrative challenges, including meeting statutory requirements, filing the required forms and calculating the credit pursuant to the IRS Code, can be readily overcome.

Outsourcing tax credit management to a reliable partner is the safest way to simplify the complex WOTC program application process, eliminate several time-consuming steps, and meet all statutory requirements successfully.

By automating the process, employers can eliminate the stress of applying for the Work Opportunity Tax Credit and start capturing significant credits for the long-term benefit of the entire organization.  

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