Tax laws come and go, yet many linger around, rarely spoken of. The rarely spoken of legislation we think you should know about is the Work Opportunity Tax Credit (WOTC), which can not only benefit companies .
Rules surrounding the WOTC encompass payroll tax in South Dakota, North Dakota, Montana & beyond as well as income tax. The credit is applied via the filing of the annual federal income tax return(s) where applicable for your situation. For non-profit groups, only veteran-related credits can apply, and the credit is applied against their ‘employer’ FICA taxes paid.
To take advantage of the credits available under WOTC, an employer needs to collect answers to specific questions from the applicant / new hire, which can be done in an HR application or applicant tracking system. Then, based upon those answers, find out if that person may qualify for WOTC. It is legal to use an applicant’s WOTC potential in your hiring decision. If the applicant/new hire qualifies, you need to file data with your state’s Department of Labor (DOL) for certification. Here are the links you'll need across the Great Plains:
- South Dakota Department of Labor Work Opportunity Tax Credit Information
- Job Service North Dakota Work Opportunity Tax Credit Information
- Montana Department of Labor Work Opportunity Tax Credit Information
During the certification process (the DOL verifying applicant or new hire’s answers to questions noted above), you may have to resolve any questions presented to you by the DOL. Once certified as WOTC eligible, you then need to calculate the credit based upon the new hire’s tenure and wages paid to them. In short, without a great process and WOTC software, maximizing tax credits for your organization can be very time consuming and tedious.
Well, we (Paystubz) figured out a way to remove the time and tedious WOTC tasks for our clients! Now, our clients’ only responsibility is to use a web-based questionnaire for each applicant and/or new hire, and that is it! Through REST API (nerd term alert!), our clients collect certificates for WOTC qualified hires and have their income tax preparer apply the credits as allowed! No fuss, no muss, simply done.
These credits can become serious money for an organization. Let’s say a 100-employee group (with employees in Sioux Falls, Rapid City, Fargo, and Billings), hiring 20 new people each year and having 5 of those 20 qualify for WOTC would likely have $20,000 or more per year of tax CREDITS (not deductions, but CREDITS!), which can be carried forward to future years as well.
Without getting nerdier for you, I’ll put it this way. Paystubz has now made WOTC credit capture extremely simple for our clients. Click here to schedule a time on my calendar to learn more about this great opportunity!
See the IRS’ information about WOTC here: https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit