With pressure rising for organizations to demonstrate authentic commitments to diversity, equity, and inclusion (DEI) in the workplace, one-way employers can expand their workforce community is through the Work Opportunity Tax Credit (WOTC) program.
Diversify your workforce with WOTC
The WOTC program incentivizes organizations to hire economically-disadvantaged individuals by reducing their tax obligations each year. Beyond reducing tax liability, employers that leverage the WOTC program not only help individuals find work, but they’re also facilitating a more diverse workplace, which studies have shown can have a significant, positive impact on overall business performance and employee engagement.
It just so happens that many of the individuals who belong to the eligible target groups reside in diverse, ethnic areas of the country.
For example, one target group includes individuals who live in federal empowerment zones, which are often located in low-income places heavily concentrated by minorities. In fact, according to a LOCUS Opportunity Zones National Ranking report, 56% of some 30 million Americans living in opportunity zones are minorities.
This represents a significant portion of the U.S. population, and poses a great opportunity for employers looking to diversify their workforce, while also reducing their owed tax liability. Employers administering the WOTC program can earn up to $3,000 per employee residing in a Federal Empowerment Zone. Check out the WOTC Address Locator to see if there is an empowerment zone near your place of business.
Like empowerment zones, another WOTC-eligible target group is those receiving food stamps. These Supplemental Nutrition Assistance Program (SNAP) recipients too are disproportionately represented by minorities, with White Americans accounting for roughly 37%, African Americans at 26%, Hispanic at 16%, Asian at 3%, and Native Americans at 2%.
Hiring individuals from the SNAP target group can earn employers up to $2,400 per employee. While reducing the owed tax liability is good for business, the larger benefit of hiring from this group is again to diversify your workforce and give back to the community.
Additional WOTC opportunities
These are just two examples, but represent some of the largest WOTC target groups. Other eligible groups include:
- Recipients of Temporary Needy Family Assistance
- Unemployed veterans, including those who are disabled
- Individuals with prior convictions
- Residents living in rural renewal counties or empowerment zones
- Individuals referred by vocational rehabilitation
- Recipients of Supplemental Security Income
- People collecting long-term unemployment
- Long-term family assistance recipients
- Summer youth employee
Employers that hire from any of the groups above have an opportunity to reduce their tax liability each year. Each group gets a different amount as well. For instance, hiring and employing disabled or unemployed veterans can generate tax credit savings of up to $9,600.
And more groups are being added to the list of eligible workers all the time. In fact, an eleventh target group, known as the military spouse, is currently expected to pass.
Getting started with WOTC
Administering the WOTC program poses minimal disruption to an organization's hiring and onboarding process. If an individual belongs to one of the communities mentioned above, the employer will need to submit the Pre-Screening and Certification Form 8850, along with proof, to the relevant State Workforce Agency no more than 28 days after the employee’s first day of work.
After receiving certification approval, employers will typically apply their WOTC savings against federal income taxes owed at the end of the year, and reflect wages workers earned during their first year of employment.
Employers can take advantage of the WOTC program through December 31, 2025, but as history has shown time and time again, it is expected to be extended for years to come. So now is as good a time as any to incorporate this low-effort initiative into your hiring process.
The WOTC program is simple to implement and only adds a few short steps to employee onboarding. Using specialized software like Trusaic’s TaxAdvantage®, hiring managers can further expedite the process and screen new employees at the time of hire to see if they belong to one of the groups mentioned above.
To learn more about how Trusaic can help your organization take advantage of the WOTC program, download our TaxAdvantage product sheet below.
Related Posts
