Welcome accountants and tax preparers! Here, you’ll find answers to your questions about the Work Opportunity Tax Credit (aka WOTC). WOTC Planet values and supports our customers’ accountants. We consider you a partner, serving our mutual clients.
The following questions are answered for you below.
What is WOTC?
Why is my client interested?
What's it worth?
Is WOTC difficult?
What role do I play as an accountant?
What does it cost?
What do we do next?
What is WOTC?
WOTC, or the Work Opportunity Tax Credit is a federal income tax credit. It encourages employers to hire veterans and people experiencing various kinds of economic distress. Visit FAQs for a complete list of target groups.
The tax credit is claimed annually on the employer's federal income tax return. S Corporations, LLCs and partnerships pass the tax credit through to owners. The benefit can be carried back one year and excess tax credit will carry forward for up to 20 years.
Why is my client interested?
Your clients are eligible for WOTC. Most employers already hire eligible employees -- often 10% to 20% of their existing workforce would have qualified. In some areas and industries, the qualification rates are even higher.
This means your client may reduce their future taxes considerably without changing their hiring process. But they need help to initiate and manage the qualification process (which is why WOTC Planet exists). Employers may also choose to actively recruit more WOTC-eligible employees to increase their tax credit.
What's it worth?
WOTC is very valuable. Large employers regularly earn $100s of thousands (and even millions) in tax credits annually. Even small businesses can earn thousands per hire.
The tax credit is based on wages paid to qualifying employees. The amount of tax credit for any particular hire depends on why the employee qualified. Most target groups can generate $2,400 in tax credit based on their first $6,000 in wages. Others can generate up to $4,800, $5,600 and even $9,600 per qualifying hire! Visit FAQs for a complete list of tax credit amounts.
Is WOTC difficult?
Well, yes and no.
To qualify, an employer must secure a WOTC certification letter for each eligible employee from their state workforce agency. As a result, WOTC requires something other than accounting knowledge. It involves fairly technical HR processes that ultimately result in a valuable tax benefit.
WOTC Planet’s role is to make WOTC easy and very valuable for your clients. We bear the burden of screening new hires for eligibility, information collection, correspondence & certification, document management and tax-credit calculations & reporting.
Since we run everything in the background, it’s easy for both you and your clients to get started.
What role do I play as an accountant?
You’re the tax gatekeeper. Your clients will rely on you for advice about WOTC.
If your client engages WOTC Planet, we’ll include you in all executive-level correspondence. We’ll also report tax credit amounts directly to you. You’ll receive an easy-to-use tax-credit report with values corresponding to specific lines on IRS Form 5884, a new tax form you’ll prepare annually for your client.
What does it cost?
WOTC Planet charges a service fee or commission equal to a small percentage of the tax credit we secure. As a result, our customers always earn much more from our services than we do. If there’s no tax credit, there is no fee.
Ultimately, it costs more to do nothing as your client might miss a valuable tax saving opportunity.
What do we do next?
Reach out to us at WOTC Planet! It’s easy.
We’ll ask a few questions. You’ll ask a few questions. Together we’ll quickly find out if WOTC makes sense for your client.