Workforce and Community Partners
What is WOTC?
WOTC is a Federal tax credit available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. About $1 billion in total tax credits are claimed each year under the WOTC program.
How can WOTC Support the Goals of Workforce and Community Partners?
WOTC can be added to an organization's tool kit for serving businesses. The tax credit can allow business customers to reduce their federal income tax liability between $2,400 and $9,600 per employee hired, per year.
WOTC can help your qualified job seekers obtain employment by offering an incentive to employers who are considering hiring them. Qualified job seekers include veterans, TANF recipients, SNAP (Food Stamp) recipients, Vocational Rehabilitation participants, ex-offenders, SSI recipients, and individuals who live in Empowerment Zones or Rural Renewal Counties.
To learn more about WOTC and the ways in which it can support your organization's goals, please contact the WOTC coordinator in your state or review the resources below.
Update on WOTC Program Status for 2014
The legislative authority for the WOTC program expired on December 31, 2013. At this time, we have no indication whether Congress may pass legislation extending authority for the program beyond December 31, 2013. However, in the past when the program's authority lapsed, Congress has retroactively reauthorized the program back to the date of expiration. In anticipation of possible retroactive reauthorization, employers should continue to submit WOTC applications for all target groups to State Workforce Agencies. For further information, please review Training and Employment Guidance Letter No. 8-13 or contact the WOTC coordinator in your state.
How does WOTC Work?
The tax credit employers can claim depends upon the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned.
For the long-term Temporary Assistance for Needy Families (TANF) target group only, the credit is available to employers who hire members of this group for up to a two-year period.
- In the first year, the employer may claim a tax credit equal to 40% of the first-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
- In the second year, the employer may claim a tax credit equal to 50% of the second-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
For all other target groups, the credit is available to employers who hire members of these groups, based on the individual's hours worked and wages earned in the first year.
- If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual's first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual's first year wages, up to the maximum tax credit.
Who can be Hired?
- TANF Recipients
- SNAP (Food Stamp) Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referral
- Supplemental Security Income Recipients
- Summer Youth Employee (living in Empowerment Zones)
Click here for more information about the WOTC target groups.
How are the Tax Credits Calculated?
Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.
Use the WOTC Calculator to see how much your business can earn in tax credits.
What are the Maximum Tax Credit Amounts?
The maximum tax credit amounts depend on the new employee's target group and the number of hours worked during the first year of employment. Click here for the maximum tax credits associated with each WOTC target group.
Workforce and Community Partner Resources