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Business owners are always hiring new employees, but most of the time they're missing out on potential tax credits just because they’re unaware about what’s available.
In this episode, Mike Jesowshek, provides a comprehensive guide on the Work Opportunity Tax Credit (WOTC) and how you as a business owner might be able to take advantage of this tax credit. He explains what the WOTC is, who qualifies for it, how to claim it, and its benefits. Throughout the episode, Mike shares practical advice and examples to help business owners understand and implement this valuable tax credit.
[00:00 - 03:30] What Is The Work Opportunity Tax Credit
- A business credit available to employers who hire individuals from targeted groups
- Designed to incentivize businesses to hire from specific populations that may face barriers to employment
- A way for businesses to reduce their tax liability while diversifying their workforce and making a positive community impact
[03:31 - 06:45] Targeted Groups and Credit Amount
- The targeted groups eligible for WOTC include:
- Veterans
- State assistance recipients under part four of title four of the Social Security Act (SSA)
- Felons
- Residents in designated empowerment zones or rural renewal counties
- Individuals referred following a rehabilitation plan or program
- Recipients of Supplemental Nutrition Assistance Program (SNAP)
- Recipients of Supplemental Security Income Benefits under Title 16 of the Social Security Act
- Individuals experiencing long-term unemployment
- The general rule for credit amount is 40% of the first $6,000 in wages for employees working 400+ hours.
- The maximum credit is typically $2,400 per eligible employee
[06:46 - 09:15] Claiming the WOTC
- Complete IRS Form 8850 before or on the day of job offer.
- Submit the form to the local agency within 28 calendar days of the employee's start date.
- Wait for certification from the local agency.
- Claim the credit using Form 5884 on your business tax return.
[09:16 - 15:00] Benefits, Examples and Considerations
- Benefits include tax savings, a diverse workforce, and community impact.
- The WOTC is a dollar-for-dollar tax credit, not a deduction.
Direct Quotes:
"The truth is that business owners are always hiring new employees, but all too often they're missing out on potential tax credits simply because they don't know about them." - Mike Jesowshek, CPA
"This is a credit, which means it's a dollar for dollar in tax savings. This is not a tax reduction. This doesn't reduce your income." - Mike Jesowshek, CPA
Resources Mentioned:
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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
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Small Business Tax Savings Podcast