Specialty Tax Practice Alert – The Work Opportunity Tax Credit

If you are hiring new employees, you should evaluate the federal Work Opportunity Tax Credit (“WOTC”).  This incentive provides a tax credit for hiring individuals from certain target groups.  The credit can reduce taxes owed on a dollar-for-dollar basis, and can be used against the federal alternative minimum tax (“AMT”).

The credit amount is based on two primary factors: (1) target group classification; and (2) length of employment during the respective tax year.  The maximum credit for each hire of a target group is as follows:

Target Group Maximum Tax Credit
Veterans $9,600
Long-Term TANF Recipient $9,000 (over 2 years)
Short-Term TANF/Qualified IV-A Recipient $2,400
SNAP (food stamp) Recipient $2,400
Designated Community Resident $2,400
Vocational Rehabilitation Referral $2,400
Ex-Felon $2,400
SSI Recipient $2,400
Long-Term Unemployment $2,400
Summer Youth $1,200

 The 2015 Protecting Americans from Tax Hikes Act extended the credit through December 31, 2019.  It also added long-term unemployment as a new target group as of January 1, 2016.  Long-term unemployment is defined as a period of unemployment not less than 27 consecutive weeks, during which the individual received federal or state unemployment benefits.

FGMK works with our clients to help them claim this federal tax benefit.  The critical element of this credit is the timing of the claim.  Potential hires must answer qualification questions on or before the date of the job offer, and the applicable tax forms must be submitted to the federal government no later than 28 days after the new hire begins work.

FGMK’s WOTC process helps you to meet the timing requirements without negatively impacting your operations.  Please contact Dan Laughlin (dlaughlin@fgmk.com or 312-638-2916) with FGMK’s Specialty Tax Practice to discuss how FGMK can help.

About FGMK

FGMK is a leading professional services firm providing assurance, tax and advisory services to privately held businesses, global public companies, entrepreneurs, high-net-worth individuals and not-for-profit organizations. FGMK is among the largest accounting firms in Chicago and one of the top ranked accounting firms in the United States. For more than 40 years, FGMK has recommended strategies that give our clients a competitive edge. Our value proposition is to offer clients a hands-on operating model, with our most senior professionals actively involved in client service delivery.

 

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