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Working with WOTC Planet means you won’t have to bother with all the technicalities. If you want to explore them, however, the U.S. Department of Labor offers a lot of free information about the Work Opportunity Tax Credit.
Frequently Asked Questions
What does WOTC mean?
WOTC is pronounced Watt-See. It is an acronym that stands for Work Opportunity Tax Credit.
What is the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit or WOTC is a federal income tax credit earned by US employers. The amount of tax credit earned is based on the amount of wages the employer pays to one or more qualifying employees.
Which employees are eligible under the Work Opportunity Tax Credit and what is the maximum tax credit each can generate?
Eligibility is based on an employee’s circumstances at the time of hire and prior to hire. There are currently 10 categories or Target Groups of eligible employees. If you count the subcategories of Target Group B (qualifying veterans), you could say that there are 14 categories. Eligible employees must be Certified as eligible by the State Workforce Agency of the state where they work. Here is the basic list. The tax credit amount shown is the maximum possible per qualifying employee.
| Maximum Tax Credit |
Target Group |
| A $2,400 |
Member of a Family Receiving TANF (Short Term) |
| B-a $2,400 |
A veteran who is a member of a family receiving SNAP (food stamps) |
| B-b $4,800 |
A disabled veteran (service related) eligible for disability compensation, who was discharged or released from active duty within the past year |
| B-c $9,600 |
A disabled veteran (service related) eligible for disability compensation, who was unemployed at least 6 months during the past year |
| B-d $2,400 |
A veteran who was unemployed for at least 4 weeks but less than 6 months during the past year |
| B-e $5,600 |
A veteran who was unemployed for at least 6 months during the past year |
| C $2,400 |
Qualified Ex-Felon – An individual convicted of a felony within the past year or who was released within the past year after a period incarceration stemming from a felony conviction |
| D $2,400 |
Designated Community Resident – and individual of age 18 through 39 who lives within the boundaries of a federal Empowerment Zone or Rural Renewal County. |
| E $2,400 |
Qualified Vocational Rehabilitation Referral – Someone who has a physical or mental disability who has received (or is receiving) rehabilitative services provided by: A state-certified agency, OR An Employment Network under the Ticket to Work program, OR The U.S. Department of Veteran Affairs. |
| F $1,200 |
Qualified Summer Youth Employee – Someone age 16 or 17 at the time of hire, who lives in a federal Empowerment AND works for the employer between May 1 and September 15. |
| G $2,400 |
SNAP (Food Stamps) Recipient – Someone between the ages of 18 and 39, who is a member of a family that received SNAP benefits (Supplemental Nutrition Assistance Program) during the 6 months prior to hire OR during at least for 3 of the last 5 months but is no longer eligible for SNAP. |
| H $2,400 |
Supplemental Security Income Recipient – Someone who received Supplemental Security Income (SSI) benefits for any month that ended during the 60-day period before hire. |
| I $9,600 |
Member of a Family Receiving TANF (Long Term) |
| L $2,400 |
Long Term Unemployment Recipient – Someone who was unemployed for at least 27 consecutive weeks until the date of hire AND received unemployment insurance compensation at any time during their period of unemployment |
What are the maximum tax credit amounts an employer can earn?
There is no limit to the number of new hires that can qualify for WOTC. The amount of tax credit that can be earned depends on why a new hire qualifies. Each possible reason for qualification is known as a Target Group. For more information about each Target Group, see the question above: “Which employees are eligible under the Work Opportunity Tax Credit and what is the maximum tax credit each can generate?”)