CMS’s Brian Kelly answers your questions about the Work Opportunity Tax Credit. This week we’re taking a look back at five of the most common questions we get about the Work Opportunity Tax Credit.
Question One: What Is the Work Opportunity Tax Credit?
CMS Responds: The Work Opportunity Tax Credit is a federal hiring incentive designed to get folks from 10 targeted groups back into the workforce. The financial incentive is between $2,400 and $9,600 depending on the target group the person falls into. Based on CMS’s 25+ years experience we know that between 10-15 percent of new hires qualify for the WOTC program.
Question Two: How are the Work Opportunity Tax Credits Calculated?
CMS Responds: The Work Opportunity Tax Credit is calculated based on three different variables. First the employee has to qualify for one of the ten target groups. secondly they have to work enough hours and earn enough dollars to hit the minimums of the Work Opportunity Tax Credit.
There are TWO main benchmarks:
- The employee must work a minimum of 120 hours for you, as an employer, to receive a 25% tax credit of the first $6,000 in wages. Maximum would be $1,500 if it meets that threshold.
- The second benchmark is that the employee reaches 400 hours worked. You would then receive 40% tax credit of the first $6,000 in wages, which is $2,400.
There are some variations, depending on the target group. For example, Long Term TANF recipients would qualify for up to $9,000, taken over 2 years of employment.
AND the Veteran Target groups can go from $2,400 up to $9,600.
Question Three: How many Work Opportunity Tax Credit Target Groups are there?
CMS Responds: The Work Opportunity Tax Credit is a federal hiring incentive designed to get folks from target groups back into the workforce. The target groups are:
- Snap or Food Stamps Recipients
- Long Term TANF recipients (taken over two years)
- Short Term TANF recipients
- Long Term Unemployed – over 27 weeks
- Designated Community Residents
- Ex Felons
- Vocational Rehabilitation/Ticket to Work
- SSI Recipients
- Summer Youth
- Veterans who have received SNAP, been unemployed or have received compensation for a service-connected disability.
Question Four: What are the benefits of Switching to Paperless WOTC Screening?
CMS Responds: Actually three or four things. Number one we can state that the employer taking advantage of a federal program to initiate jobs and we need their participation.
Also, our web-portal is multi-lingual, we can actually go up to 100 different languages so people understand the questions that were asked, and it’s a lot easier for them to respond, and respond positively.
So, when we put someone through our web-based screening process we do see an escalation of how many tax credits we get as qualified. It’s about a 30% improvement over paper.
Question Five: Why Use a WOTC Screening Service (like CMS) Instead of Doing It Yourself
CMS Responds: Why should I use a WOTC screening service like yours, obviously CMS’s, when I can do it myself? The reason why you’d choose us is because it’s a little complex, and there’s three different units of our government that oversee the WOTC program. From the I.R.S. giving us its guidelines, to H.U.D. indicating those designated community residents. (The third, which is not mentioned in the video, is the Department of Labor). What we find being a third party service, we can ask those sensitive questions that, as an employer, you might not want to. That is probably the biggest reason of all.
About Our WOTC Screening Services
- Why you should use CMS’s WOTC Tax Screening Service rather than doing it yourself.
- Get an idea of how much you could be saving by utilizing the Work Opportunity Tax Credit for your company, try our WOTC Calculator.
- Are you a CPA or tax service provider? Find out how you can become a strategic Business Partner.
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In over 25 years of providing valuable WOTC Screening and Administration services we’ve saved millions for our customers.
Contact CMS today to start taking advantage. Call 800-517-9099, or click here to use our contact form to ask any questions.