Famed English actor Jeremy Irons said, “The secret to life is timing.” So too is success with the Work Opportunity Tax Credit!
Also known as “WOTC” (pronounced Watt See), the Work Opportunity Tax Credit rewards businesses with $2,400 to $9,600 in federal income tax credit when they hire members of a WOTC target group.
However, don’t let the term “target group” frighten you. Being a member of a target group means a person is experiencing something in their life that warrants a little extra help getting a job. These are neighbors and co-workers, maybe even you or me right now. Read more about WOTC target groups here.
Back to timing. Timing can make or break the WOTC certification process.
“Certification? What is that?” you ask.
Let’s assume for this discussion that you are an employer. To claim a tax benefit under the WOTC program, you must first request a certification from the WOTC office at your state’s workforce agency. The certification verifies that your new employee is WOTC eligible. After (and only after) that certification is approved, your company can claim an amazingly valuable tax credit!
There are multiple steps to this process. Let's walk through it and see why timing is critical.
Step One, Complete WOTC Pre-screening Form
Your job applicant or new hire completes IRS Form 8850, also known as the WOTC Pre-screening Notice. The questions on this form help to determine if an individual has experienced any of the WOTC-qualifying circumstances.
By law, this form must be completed “on or before the day” you offer them a job. Many companies conduct this screening on the same day employees fill out their other new-hire paperwork. It cannot be completed later.
Step Two: Complete Individual Characteristics Form
Using the Department of Labor’s ETA 9061 WOTC Individual Characteristics form, your new hire now responds to a second set of questions. These questions are more detailed than those on the WOTC Pre-screening Notice I mentioned above.
Less like the IRS 8850, this form requests specific and detailed information about topics that are illegal to ask about prior to hire. Additional caution is needed to avoid actual or perceived violations of employment law.
Also, while employees themselves must use and sign the Pre-screening Notice, you can use other instruments to request this more detailed secondary information. This approach can be helpful because many employees find the Individual Characteristics form complicated and difficult to read.
For example, you (or a helpful WOTC analyst from WOTC Planet) could ask these questions verbally, or in a private survey, or using an online questionnaire. You could then transfer the employee’s information onto the Individual Characteristics form and sign it yourself.