Federal employment credits are valuable tax solutions many CPA tax experts work to capture for their clients. By taking advantage of the Work Opportunity Tax Credit (WOTC), CPA firms are able to help clients claim significant tax savings. 

The WOTC is one of the most overlooked avenues of capturing employment credits. Although the benefit is an income tax credit, the company capturing this credit is required to have the employee answer several qualification questions at the time of hire, so the process relates to the company’s HR department as opposed to the accounting and finance department. By working with their clients to incorporate a point-of-hire process for screening new employees, a CPA brings significant value by capturing the WOTC and other similar state-level hiring credits.   

Most CPA firms want to help their clients achieve the greatest possible tax savings. In order to take advantage of the WOTC fully, however, your clients must have certain processes in place. 

When you advise your clients about steps to take towards reducing taxes, ask them if they have a hiring methodology that takes the WOTC into account. Your clients should have a screening process that asks new hires whether they fit under any of the 13 eligible target groups including the following 4 primary categories: 

• Recipients of food stamps (SNAP)
• Individuals living in an empowerment zone
• Military veterans
• Recipients of Long-Term Family Assistance 

Using e-Signature technology and a smart hiring methodology helps your clients ensure employees submit the correct documentation on time. It is beneficial to speak with your clients so they understand the importance of following up with new employees in order to save on taxes. 

Addressing Client Concerns 

Your clients may express some doubts about their eligibility for the WOTC. In your conversations with clients, it may be necessary to address the following concerns: 

• My business does not hire employees who qualify for the WOTC.
• Employees eligible for the WOTC are not qualified to work for me.
• The tax savings possible through the WOTC are not worth the time it requires. 

If your client believes they don’t hire individuals eligible for federal employment credits  or that a WOTC-qualified employee is unable to work for their company, it is beneficial to advise them that people who qualify for the WOTC often do have the skill sets necessary for success at positions your client hires for. 

By considering WOTC-eligible individuals for employment, your client’s business is at an advantage because they have a wider applicant pool. It may be that the WOTC-qualified individual is the best candidate for the position. 

Large companies should be advised that they may be eligible for significant tax savings through federal employment credits. The maximum tax credit is generally $2,400 per employee (40% of the first $6,000) over the first year of employment. However, the Veterans with a Service-Connected Disability target group does allow for a maximum credit of $9,600.   

Outsourced Tax Credit Services 

If your CPA firm is working to capture the most tax credits and savings possible for your clients, it is often beneficial to work with tax experts at an outsourced tax credit service. 

Experienced tax advisors are knowledgeable about the intricacies of tax rules and have the expertise to advise CPA firms in instances where outside assistance is needed. Speak with a tax expert today and receive answers to your most pressing questions.

Ready to learn more about frequently overlooked tax incentives and to discover whether your clients qualify? Schedule a free, 30-minute consultation with a tax expert at Corporate Tax Incentives.