Work Opportunity Tax Credit (WOTC): Frequent Pitfalls
WOTC is for employers, not employees.
The Work Opportunity Tax Credit (WOTC) provides a federal tax credit to employers, not employees. Job applicants who fit within one of nine WOTC target groups may benefit from the program though, as it provides an incentive for employers to hire them.
If you are looking for a job, you should consider having your WOTC eligibility pre-screened by the Employment Development Department. If you are WOTC-eligible, you can let potential employers know.
There are only nine target groups
There is no flexibility when it comes to the types of eligible employees. The WOTC guidelines define nine target groups of employees that qualify the employer for a tax credit. The nine target groups are:
Ex-felons hired no later than one year after conviction or release from prison
Designated community residents, aged 18-39, who live in a federally designated Empowerment Zone, Enterprise Community, or Renewal Community.
Vocational Rehabilitation and Ticket to Work Employment Network referrals.
Summer youth, aged 16-17, who live in a federally designated Empowerment Zone, Enterprise Community, or Renewal Community and have not previously worked for the employer.
Long-term Temporary Aid to Needy Families (TANF) recipients.
Certain employees cannot qualify your business for a tax credit
Certain employees will not qualify your businesss for a Work Opportunity Tax Credit, even if they fit into one of the nine target groups. This includes relatives, dependents, anyone you rehire, and any employee working less than 120 hours in a year. For a complete listing of ineligible employees, click here.
Partial credits are available
For your business to receive the maximum Work Opportunity Tax Credit, your employee must have worked at least 400 hours for the year. If your employee has worked 120-399 hours, your business may still be eligible for a reduced tax credit.
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