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Tax Credits Blog

How Much Did you Overpay Your Taxes Last Year?

How much did you overpay your taxes last year?
The answer is a simple calculation

If you didn’t take advantage of the Work Opportunity Tax Credit (“WOTC”), the answer is $180 times the number of hires you had in 2018.

 

The program rewards companies for hiring from 10 targeted groups, mostly individuals who have been on public assistance in the recent past. Categories include long-term unemployed, unemployed veterans, ex-felons, people who live in a rural county or whose family has been on welfare or food stamps (over 300,000 people go on food stamps each year according to the Dept of Labor statistics). Businesses are required to have their new hires fill out two additional forms prior to hire date, and then send in the forms of those who qualify. It is then up to the individual States to confirm or deny the person’s eligibility for tax credits, which can be as little as $200 (someone who worked the 120-hour minimum and were paid minimum wage) but up to $9600 for an unemployed vet with a service-connected disability.

 

The WOTC program has been around for over 20 years, but not many companies take advantage of it because of certain misconceptions (and a few truths) about the program that make business owners unwilling to go through the effort. The feedback we receive on a consistent basis is that the program is labor intensive and difficult to manage. Dealing with the state agencies that are responsible for the program can be time consuming. Many business owners decide that the program is not worth the effort because keeping track of every employees’ eligibility, responding to State government RFIs, and following up with terminated employees is a lot of work. If the volume of hiring is very high, administering the program is enough work for a full-time employee, but hiring someone to be responsible for it dilutes the benefit. The reason EmployerIncentives.com has a business in the first place is because business owners want the benefit of WOTC without all the hassle.

 

We discovered these credits back in 1996 and went “all in” on helping companies administer this federal income tax credit and today, we save our clients over $5,000,000 in taxes each year. The best companies to make the most of these credits in any for-profit business where there is a decent amount of turnover with entry level workers. On average, 12-15% of new hires will qualify for the program and the average credit that we secure per new hire is $1,500. Some industries have a 25% eligibility rate meaning one of every 4 new hires would qualify for the credit. In this case, the overpayment is number of hires last year times $375.00.

 

This is truly found money as tax credits remain in the owner’s bank account, improving profitability, cash flow and stakeholders’ equity. The program is difficult to administer but the reward is worth it. To find out more about this program, visit our website at www.EmployerIncentives.com.