Hiring tax credits can have a significant impact on a company’s tax liability. For example, by using the Work Opportunity Tax Credit (WOTC), companies can receive up to $9,600 in federal tax credits for certain employees who are hired. However, all too often, companies fail to fully capitalize on the benefits of this tax credit as it can be a complicated and time-consuming procedure for each party involved. Applicants may choose not to complete the WOTC screening questions and disclose the necessary data while employers may be afraid that identifying candidates as members of target groups puts them at risk of breaking anti-discrimination laws.
Still, taking advantage of this valuable credit does not mean sacrificing a positive candidate experience. To achieve the cost-effectiveness of this program and claim available tax credits, employers can outsource WOTC screening and administration and rely on WOTC service providers.
Recent Updates to WOTC Screening Requirements
WOTC screening necessary to determine eligibility, submitting the right paperwork and filing for the tax credit are the basic steps involved in taking advantage of the WOTC. This process is relatively straightforward, but can also be overwhelming when there are large volumes of applicants and new hires to process. At the same time, WOTC screening can be easily automated, allowing employers to overcome the complexity surrounding eligibility and credit tracking by enlisting the help of WOTC service providers.
In September 2022, the Internal Revenue Service (IRS) published updated information about the WOTC to help employers deal with a tight labor market and to respond to an investigative report. The report published by an investigative news organization indicates that WOTC was often being claimed by temporary employment agencies that hired convicted felons as workers and soon laid them off.
The updates include information on the pre-screening and certification process. To satisfy the statutory requirement, Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit must be completed by the job applicant and the employer on or before the day a job offer is made.
After pre-screening a job applicant, employers must request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work.
Overcoming WOTC Screening Challenges with WOTC Service Providers
WOTC service providers can support WOTC screening processes to identify eligible candidates and help employers calculate and claim the credit. However, to ensure the most favorable outcomes, employers need to take into account different factors, such as the solution, the results, and the fees.
Given that most employers want to ensure that WOTC screening does not have a negative impact on candidate flow or the candidate experience, it is important to integrate the WOTC workflow with the recruiting system so that processes are quick, easy to understand, and flow seamlessly. At the same time, because the questions as worded on the Form 8850 can be confusing, presenting the eligibility determining questions to the candidate in easy-to-understand language is also important.
To accomplish these objectives, automated WOTC solutions offer effective surveys that eliminate redundant questions, source information from the Applicant Tracking Systems (ATS) through an integration, and ask the questions in an easy-to-understand format. Therefore, when considering a WOTC provider, employers should make sure that they have a WOTC module that integrates with their ATS, enables changes to their WOTC solution for a consistent look and feel, and has a design that positively impacts the overall user experience.
In addition to this, employers need to measure the value of WOTC participation. Comparing the potential credit opportunity with other similarly situated companies can provide a good estimate of the relative value of implementing a WOTC solution as well as insight into results and possible areas for improvements.
Improved WOTC Screening for Better Results
Even though there are complexities related to WOTC screening, the benefits that employers and employees can experience with this program are worth the effort. Any business, regardless of size or industry, may be eligible to claim the tax credit and, since there is no limit to the number of individuals that employers can hire, there is also no cap on the number of credits that they can claim.
Choosing the right WOTC service provider can help employers maximize WOTC benefits even more. After comparing the specific solutions, results and fees involved, it is important to choose a user-centric provider that secures the user experience, understands a company’s culture and process, and offers consultation and flexibility. By doing this, employers can significantly improve WOTC screening compliance rates and simplify data collection, but also help applicants complete the form quickly and correctly and meet the necessary deadlines.