Maximize Your Employment Tax Credits and WOTC with These Tips

May 23, 2019 | Natalie Hoffmann, CPA.CITP

Natalie Hoffmann, CPA.CITP; Partner; Honkamp Krueger & Co., P.C.

Employment tax credits, particularly the Work Opportunity Tax Credit (WOTC) program, can be extremely lucrative for employers who meet optimal criteria for these programs. Between state credits and WOTC, there are many opportunities for employers in a variety of industries to significantly improve their bottom lines through these credits. However, applying for and recouping these credits can be an overwhelming process as deadlines are short to submit information. Additionally, identifying new hires who qualify can be difficult. To improve your experience and maximize these credits to your advantage as an employer, it is key you identify if you qualify, understand your target groups, optimize parallel credits and find a provider partner to help streamline the process.

Identify if you qualify

Employment tax credit programs like WOTC are a good fit for organizations that meet the following criteria:

  • You experience high turnover or frequently onboard new hires
  • You are expanding and need to fill a significant number of positions
  • You are in one of the following industries:
    • Staffing
    • Health care
    • Hospitality
    • Call center
    • Convenience store
    • Restaurant and food chain

The key to WOTC is in the number of new hires. For example, if a company has 500 employees with 100% turnover and roughly 15 percent of employees (in this case 75) qualify for tax credits, an employer could conservatively see up to $1,000 per employee. When multiplied by 75, that can result in up to $75,000 in annual tax credits. Some target groups are worth up to $9,600, so it is easy to see how these lucrative credits can cumulate in the right industry with the right conditions.

Know your target groups

Understanding the target groups state agencies and the WOTC program accept is an important step to identifying your credit opportunities.

Federal target groups

  • Temporary Assistance for Needy Families (TANF)
  • Disabled or unemployed veteran
  • Vocational rehabilitation referral
  • Summer youth
  • Ex-offender
  • Supplemental Security Income (SSI) recipient
  • Food stamp recipient
  • Designated community resident
  • Long-term unemployed

State target groups

  • Hiring credits and refunds
  • Hiring disadvantaged workers
  • Job creation credits
  • Veteran credits

These target groups have been handpicked by the federal and state governments for a reason. The investment in providing these credits far outweighs the cost of keeping individuals on public assistance programs, which has been a driving factor in WOTC’s longevity. Additionally, veterans for example, have been promoted as targeted new hires because of the unique skill sets they bring to the workforce. Traits like leadership, teamwork and composure are highly sought after in today’s job market, and if your organization frequently hires veterans, credits may be available to you for recognizing that talent.

Optimize parallel credits

If you know and understand the federal and state target groups, it is easier to find parallel credits and maximize both programs for hires in the veteran and TANF categories, for example. Military incentives are available in Alabama, Alaska, Arizona, New York, Washington and West Virginia. TANF parallels exist in Arizona, South Carolina and Virginia. Other parallel state credits include: Hawaii (vocational job referrals), Illinois (ex-felons), Louisiana (first-time non-violent offenders), New York (employment of persons with disabilities and at-risk youth) and North Dakota (disabled and mentally ill).

Find a provider partner

If you’re ready to dive into the world of employment tax credits and WOTC, a partner provider can help significantly simplify the process. Look for a provider who:

  • Researches, applies for and recoups on your behalf. The best providers will do the heavy lifting for you. They’ll help you understand which credits you qualify for and what new credits may be coming down the pipeline. Staying on top of these programs can be a daunting task and no one has that kind of time. The right processor will handle this for you.
  • Provides a digital process. Electronic filing is key to ensuring you meet the strict deadlines for these credits. When you are tasked with completing paper forms, sending them to your provider for verification, and then forwarding on to agencies, a lot of time can be lost. Electronic filing should be an essential component of your provider search.
  • Uses mobile technology. Top tax credit processers today are embracing mobile technology to help you complete these forms. If information on a new employee is missing, these programs can use text messaging to communicate with employees and gather the information you need to complete the process. This saves valuable time and resources.

The WOTC program and similar state incentives are low-hanging fruit for employers. Many employers are completely unaware of these programs and are missing out on these valuable opportunities. If you are willing to dedicate the time and resources to maximizing these programs or hiring a partner to help, the results could be extraordinary to your business’ bottom line. And, as an employer, you can gain satisfaction about helping underserved populations get back to work and alleviating the stress on many public assistance programs. 

Natalie Hoffmann, CPA.CITP is a partner at Honkamp Krueger & Co., P.C. Email her at