The R&D Tax Credit was first introduced in the United States through the Economic Recovery Tax Act of 1981. With worries that the U.S. was falling behind in production and innovation relative to the global economy, the Economic Recovery Tax Act aimed to stimulate the U.S. economy and encourage investment within the United States. Though this tax credit was originally only anticipated to last for two years, the PATH Act of 2015 permanently extended the R&D Tax Credit due to the immense value that research and development brings to the U.S. economy each year.

The R&D Tax Credit was first introduced in the United States through the Economic Recovery Tax Act of 1981. With worries that the U.S. was falling behind in production and innovation relative to the global economy, the Economic Recovery Tax Act aimed to stimulate the U.S. economy and encourage investment within the United States. Though this tax credit was originally only anticipated to last for two years, the PATH Act of 2015 permanently extended the R&D Tax Credit due to the immense value that research and development brings to the U.S. economy each year.

What happens to any unused portions of the credit?

All businesses are permitted to carry forward any unused portions of the federal R&D credit for up to twenty years. Businesses that have yet to achieve profitability or stand at low profits may not be able to take full advantage of the tax credit but they are permitted to carry it over or use it towards payroll taxes. Consult with LEAF to review utilization for specific circumstances.

Do businesses automatically get audited if they file for the R&D Tax Credit?

Yes. If your client’s company has been performing research and development practices for the past few years they may be able to still claim it by amending their tax return.

Work Opportunity Tax Credit | Leaf Tax Consultants

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The Work Opportunity Tax Credit incentives businesses to hire a diverse workforce. This tax credit is given to companies that hire people from one of ten targeted groups. Companies can claim the WOTC for employees hired on or before December 31, 2025. The WOTC is a collaboration with the Internal Revenue Service and the Department of Labor.

The Work Opportunity Tax Credit is contingent on companies’ proactive hiring process. The tax credit requires that an employee fill out specific information on or before their date of hire for a business to qualify. The employer must submit that information to a local workforce agency within 28 days, although some states may requires more advanced notice to qualify.

What is the Work Opportunity Tax Credit?

The Work Opportunity Tax Credit is an incentive from the IRS and the Department of Labor to encourage businesses to hire employees from specific targeted groups. If a business is hiring people from one of the ten specified groups, then they may be eligible for the credit, as long as they meet other criteria. One of the most important factors in the WOTC is the requirement that employers have each hire fill out Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit). This must be done on or before the employee’s date of hire.

What Targeted Groups Apply for the WOTC?

To qualify for the WOTC, each employee must meet the following:

be in their first year of employment;
certified as a member of a targeted group; and
work at least 400 hours for that employer.

The following groups may qualify for the WOTC:

IV-A recipient
Veteran
Ex-felon
Designated community resident
Vocational rehabilitation referral
Summer youth employee
SNAP benefits recipient
Supplemental security income (SSI) recipient
Long-term family assistant recipient
Long-term unemployment recipient

Does my company qualify for the WOTC?

Any company that hires from the groups specified may qualify for the tax credit.

However, companies must have a system in place to track and register applicants and submit qualified employees for the WOTC.

If a business does not have employees fill out the proper forms before hiring, the employer cannot retroactively receive the tax credit.

The Employee Retention Credit is great for companies across all industries, including:

IV-A recipient
Veteran
Ex-felon
Designated community resident
Vocational rehabilitation referral
Summer youth employee
SNAP benefits recipient
Supplemental security income (SSI) recipient
Long-term family assistant recipient
Long-term unemployment recipient

What’s the process of getting the WOTC?

To receive the WOTC, a business should create a procedure to capture the information of qualified employees, create a process to have Form 8850 completed upon hire, and then also have software or procedure to track the hours worked by each individual who qualifies for the WOTC.

With all of that information, a tax consultant will be able to help you determine the amount of WOTC that your business can claim. After you’ve submitted the appropriate form to your state’s workforce agency, you will receive notice that the employee did or did not qualify. If they did qualify, you will be able to file for the WOTC.

How to find the right tax consultant

Just like other tax credits, the Work Opportunity Tax Credit comes with its own nuances.

Hiring a tax consultant can help alleviate the stress of qualifying for a tax credit.

Leaf Tax Consultants is experienced with a variety of tax credits, and our team can help you understand if your employees qualify for the WOTC, and walk you through the necessary steps to receive the credit.

Find out more about how to can take advantage of WOTCs here.

Frequently Asked Questions

What companies can qualify for the WOTC?

Companies may qualify for the WOTC if they hire workers who are part of one of the ten groups determined by the IRS. Those groups include a variety of people, including veterans, ex-felons, long-term unemployment recipients, and more.

Can I retroactively get the WOTC?

No, companies must file Form 8850 when hiring a new employee who qualifies for the WOTC. Some states require that the form be filled within 48 hours while others require it be filed by 28 days.