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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:

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:

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

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.

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.