WORK OPPORTUNITY TAX CREDIT
Quick Reference Guide for Employers
REQUEST
Did you know that in 2020, State Workforce Agencies issued 1.6 million
certifications to employers seeking a Work Opportunity Tax Credit (WOTC)?
WHAT IS WOTC?
The WOTC is a federal tax credit available to employers who invest in American job seekers who have consistently
faced barriers to employment. Employers may meet their business needs and claim a tax credit if they hire an
individual who is in a WOTC targeted group. Employers must apply for and receive a certification verifying the
new hire is a member of a targeted group before they can claim the tax credit. Aer the required certification is
secured, taxable employers claim the WOTC as a general business credit against their income taxes, and tax-
exempt employers claim the WOTC against their payroll taxes.
BENEFITS TO EMPLOYERS
The credit available ranges from $2,400 up to $9,600,
depending on the targeted group and qualified wages
paid to the new employee generally during the first
year of employment. Generally, the credit is 40% of
qualified first-year wages for individuals who work
400+ hours in their first year of employment.
HOW CAN EMPLOYERS FIND JOB
CANDIDATES IN WOTC TARGETED
GROUPS?
The American Job Centers and partnering agencies
and programs can help employers connect with
skilled job seekers who may be in a targeted group
for the WOTC. American Job Centers (AJCs) can assist
employers in recruiting talent, hosting job fairs,
conducting skills assessment, and providing support
to workers transitioning to new jobs.
Some jobseekers may also be pre-certified as in a
WOTC targeted group. This pre-certification can be
helpful, but is not required for hiring or claiming the tax
credit, and job candidates that may be a good fit for
your business and eligible for the WOTC may not have
a pre-certification. A state workforce agency (SWA)
or participating agency can determine whether a job
seeker may be in a WOTC targeted group, and note
this determination with a Conditional Certification,
ETA Form 9062. The state agency then gives that pre-
certification to the job-ready applicant to use during
their job search. The Conditional Certification serves an
as oicial record of WOTC pre-certification by:
▶
Alerting prospective employers to the availability
of the tax credit if the individual is hired, and
▶ Providing a means for employers to request a
WOTC certification for the job applicant/new hire.
A “participating agency” is a federal, state, county,
or local government agency or a grantee of these
agencies. Examples of participating agencies may
include:
▶ American Job Centers
▶
Vocational Rehabilitation agencies
▶ City and county social service offices
▶ Department of Corrections
▶ Veterans Administration and related service
organizations
▶ Workforce Innovation and Opportunity Act (WIOA)
grant recipients
State Workforce Agencies (SWA) are authorized
to administer the WOTC certification process and
coordinate with American Job Centers and partnering
agencies to help employers connect with skilled
job seekers who may be in WOTC targeted groups.
Employers should contact their SWA for assistance
connecting with partnering agencies and filing WOTC
certification requests.
HOW CAN EMPLOYERS GET STARTED
WITH WOTC?
Learn how to file a certification request by visiting the
U.S. Department of Labor WOTC website at https://
www.dol.gov/agencies/eta/wotc. View eligibility
criteria for WOTC targeted groups in the WOTC
Desk Aid, or visit the IRS website at https://irs.gov/
businesses/small-businesses-self-employed/work-
opportunity-tax-credit.
OTHER HIRING INCENTIVES FOR
EMPLOYERS
Employers can expand their hiring practices with the
WOTC or with other programs such as the Federal
Bonding Program (FBP) or ‘Employee Retention
Credit’ (ERC) under the American Rescue Plan Act.
The Federal Bonding Program (FBP). Employers
can receive fidelity bonds free of charge when hiring
certain job applicants. The bonds reimburse the
employer for any loss due to employee the ($5,000
up to $25,000), and cover the first six months of
employment at no cost to the job applicant or the
employer ($0 deductible). Fidelity bonds can be
applied to ANY job, ANY state, and to ANY employee
(excluding a self-employed individual) who is paid
wages and has Federal taxes automatically deducted.
To date, FBP has issued over 50,000 bonds. Gain
access to tools that help employers integrate the
FBP into hiring endeavors by calling 1-877-US2-JOBS
(1-877-872-5627) or visit the Bonds4Jobs website:
https://bonds4jobs.com/resources.
The Employee Retention Credit (ERC). Under
present law, the ERC is a refundable tax credit
against certain employment taxes equal to 50% of
the qualified wages paid by an eligible employer
aer March 12, 2020, and before January 1, 2021, and
70% of qualified wages paid by an eligible employer
aer December 31, 2020, and before January 1, 2022.
Eligible employers can get immediate access to the
credit by reducing employment tax deposits they are
otherwise required to make. For example, a small
business employer that hires an individual released
from prison following incarceration for a felony within
the last twelve months, and employs the individual
from July 1, 2021, through December 31, 2021, could
qualify for a credit of up to $16,400 for that employee
by claiming both the WOTC and the ERC, provided
that the same wages are not used to calculate the
WOTC and the ERC. For more information on the ERC,
visit the IRS website: https://www.irs.gov/newsroom/
new-law-extends-covid-tax-credit-for-employers-
who-keep-workers-on-payroll.
WOTC Quick Reference Guide for Employers
