The Work Opportunity Tax Credit (WOTC) was part of the tax provisions Congress passed into law on December 18 as part of the PATH Act. The WOTC, in particular, has been extended through 2019.

This latest news may have prompted many of your clients to inquire if their business activities qualify for the WOTC and, if so, how they may proceed to capture these substantial employment incentives.

Follow these three steps to ensure your CPAs are putting your firm’s clients on the right path toward identifying and implementing a successful WOTC program:

Typically, WOTC experts determine a client’s candidacy one of three ways:

• Industry: Certain industries experience high turnover, making them an ideal candidate for the WOTC. These industries include retail, hospitality and healthcare.
• Average number of annual new hires: Clients that typically hire more than 100 new employees annually are good candidates. The new hires can fill existing or newly created employment positions.
• Payroll: If the annual new hire total is unknown, looking at the annual payroll total may help. A client with high annual payroll typically has many employees, which commonly means they hire a lot of employees during the year.

Step 2: Discuss The Benefits Of The WOTC Program

Once you’ve established that a client may be a good candidate for the WOTC program, discussing the benefits may help convince the client to participate in the program. The following benefits are universal, in that they apply to most businesses that qualify:

• A client can reduce their tax liability. With a conservative average credit of $200 per new hire, a business with 300 annual new hires could expect to receive an annual WOTC benefit of $60,000.

• Establishing a WOTC program allows human resources and tax departments to become revenue-generating areas for a client’s business. Also, taking part in the WOTC builds a sense of community or “giving back” by hiring employees that typically face barriers to employment.

• The use of e-signatures and WOTC coordinating offices using electronic processing systems have reduced much of the administrative burden that previously existed. These recent changes drive program efficiency and eliminate disruptions to daily business operations.

• In the past, many taxpayers assumed they didn’t hire from WOTC target groups, but the newly created target category for the long-term unemployed is a broader category that spans every industry and person. As long as the new hire has been unemployed for more than six months and received some type of unemployment benefit, they may qualify.

Step 3: Help Clients Implement The WOTC Screening Process

After a client is excited about the opportunities the WOTC offers and is ready to pursue the program, the next step is implementing a screening process for new hires. This screening process can be fairly labor intensive, so not many companies do it internally and many CPA firms partner with specialty firms that can offer screening services.

The WOTC program allows 28 calendar days from an employee’s date of hire to get the employee screened and turn in screening applications to the state Department of Labor for certification. This can be challenging, especially if you have a large number of new hires or multiple business locations. Partnering with a firm who is equipped with tools to screen employees and who specializes in the WOTC program can ensure clients will maximize their WOTC benefit.

Outsourced tax consultants provide this type of service to CPA firms. They help your clients implement an already proven screening process, so that at the point of hire, the employee may be certified for the WOTC.

By partnering with an outsourced tax consultant, your CPAs are able to guide clients on the qualifications and benefits of the WOTC, as well as to assist them with establishing processes for screening new hires. Once the screening method is implemented, the client may begin actively capturing the credit year after year.

Want to learn more about partnering with a tax consultant to help your clients implement a WOTC program? Download your complimentary, educational guide.