WORK OPPORTUNITY TAX CREDIT

The Worker’s Opportunity Tax Credit (WOTC) is a federal tax credit. It provides incentives to employers who hire from identified target groups which traditionally face high rates of unemployment. These individuals, once hired, gain valuable work experience which in turn makes them even more employable in the future. In the past, employers in the state of Tennessee have collectively saved over $200 million due to applying this tax credit while hiring from one of these targeted categories:

  1. Qualified Veterans
  2. Long-term TANF (Tennessee Assistance for Needy Families) recipient
  3. Other TANF recipient
  4. Qualified Supplemental Nutrition Assistance Program
  5. Designated Community Residents of Empowerment Zones*
  6. Summer Youth Program Employees*
  7. Vocational Rehabilitation Referrals from a state or federal agency
  8. Qualified Ex-felons
  9. Social Security Income recipients

*Pending designation of Economic Zone residency

Recently, there have been some significant changes made to the WOTC. On January 3, 2013, President Obama signed the American Tax Payer Relief Act of 2012 into law. This legislation continues the authorization of the amendments and expansions to the definition of the “Qualified Veterans” section of the WOTC, as outlined in the VOW to Hire Heroes Act of 2011. For more specific info about the recent changes to the WOTC, please see this page from the U.S. Department of Labor. 

In regards to applying the WOTC towards Qualified Veterans, the following subcategories are now extant:

  1. Qualified Short-Term Unemployment Insurance (UI) Recipient Veteran:
    A credit of 40 percent of the first-year wages up to $6,000 (maximum credit of $2,400) for hiring a veteran who has been receiving UI for at least four weeks and less than six months within the one-year period ending on the hire date.
  2. Qualified Long-Term UI Recipient Veteran: 
    A credit of 40 percent of the first-year wages up to $14,000 (maximum credit of $5,600) for hiring a veteran who has been receiving UI for at least six months within the one-year period ending on the hire date.
  3. Qualified Recently Separated Disabled Veteran:
    A credit of 40 percent of the first-year wages up to $12,000 wages (maximum credit of $4,800) for hiring a veteran with a service-connected disability who was discharged within the past 12 months.
  4. Qualified Long-Term U.I. Recipient Disabled Veteran:
    A credit of 40 percent of the first-year wages up to $24,000 (maximum credit of $9,600) for hiring a veteran with a service-connected disability who has been receiving UI for at least six months within the one-year period ending on the hire date.
  5. Qualified Food Stamp Veteran:
    A credit of 40 percent of the first-year wages up to $6,000 (maximum credit of $2,400) for hiring a veteran who is a member of a family who has been receiving food stamps for at least a three-month period during the previous 14-month period ending on the hire date.

To learn more about how your business may qualify for a Work Opportunity Tax Credit, please contact Henry Lewis at (901) 636-6228 .