Second Chance to Claim Often Overlooked Tax Credit...But Expiring Soon
One tax break often overlooked is the Work Opportunity Tax Credit (WOTC).
The WOTC has been around for years but many businesses are not aware of
it.
It is a program that allows employers who hire individuals
from certain targeted groups (see list below) to receive a federal income tax
credit.
Industries such as construction, restaurants, transportation, health care, c-stores,
manufacturing, distributors, call centers, and staffing agencies tend to see the most qualifying employees for this credit.
How much is the
credit worth?
It ranges from $2,400 to $9,600 per new hire and there is
no limit on the number of new hires or total amount of credits you can
claim.
That's like free money from the government! Sadly, millions of dollars in tax credits go
unclaimed each year even though employers are hiring workers every day from the
WOTC targeted groups.
Why you have to act
fast?
One reason the credit is overlooked is because you have to
be proactive to take it. Even though it’s
a federal credit paperwork must be filed with the state workforce agency within
28 days of the employees start date.
Businesses have to be aware of this deadline in order to qualify their
targeted group employees for the credit.
The good news is that on June 17, 2016 the IRS provided
relief that allows employers to claim the credit on employees hired January 1,
2015 through August 31, 2016...but you must file the paperwork no later than September 28, 2016.
You get a
second chance to look back at hiring records and take advantage of this
underutilized tax credit...but keep in mind the 28 day filing deadline is back in place
for new hires after August 31, 2016.
What should you be
doing immediately?
- If you
ARE NOT currently participating in the WOTC you need to review
your 2015 hiring records and check them against the targeted list
below. Have the qualifying
employees complete Form 8850. Then
submit the application online.
- If you
ARE currently taking advantage
of WOTC you should review your 2015 new hire files to be sure that you did
not overlook any qualifying employees.
If so have the employee complete Form 8850. Then submit the application online.
Here are 3 steps to follow to claim the credit:
Step 1: Know Your Targeted Groups
To determine whether you qualify for this tax break first
determine if a new hire belongs to one of these targeted groups:
- Food stamp (SNAP) recipients
- Qualified
recipients of Temporary Assistance for Needy Families (TANF)
- Veterans
- Ex-felons
- Designated
community residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational
rehabilitation referrals
- Summer
youth employees (living in Empowerment Zones)
- Supplemental
Nutrition Assistance Program benefits recipients
- Supplemental Security Income recipients
Effective January 1, 2016 the following target group was
added:
- Long term unemployment recipient
Each category has specific rules. Here is a chart for the certification criteria for the WOTC target groups.
Step 2: Check whether
a new hire meets the other requirements of the credit.
You won't be eligible for any credit if a new employee:
- Worked
for you fewer than 120 hours during the year
- Previously
worked for you or
- Is
your dependent or relative
Step 3: Complete Form
8850 and submit online
Missouri is now offering an online application system for submitting certification paperwork. The
application entry process includes entering employee and employer information
from the completed and signed IRS Form 8850.
How we can help?
We can do the work and let you take the credit.
We can help you determine if your new hires qualify,
calculate the credit and complete and file the necessary forms. If you have already filed your 2015 income
tax return we can prepare the amended returns to request the refund.
Follow me on Twitter, Facebook and LinkedIn for updates, visit our website at kinzeyarndt.com or give us a call at (417) 882-9000.
