March 23, 2021 – COVID-19 has dealt the nation’s economy a challenge like we have never experienced. The government initiated stay-at-home orders, forced closures, and/or limitations on many companies’ ability to conduct “business as usual” has impacted profitability and caused a severe decline in employment.
Expectations for 2021 should be viewed with cautious optimism, as businesses of all sizes struggle to understand and predict what the “new normal” means for them. According to the Bureau of Economic Analysis (BEA), at the end of 2020, 74 percent of small businesses reported experiencing negative effects from COVID-19. Education, hotel, restaurant, entertainment, beauty, fitness, and health care industries are feeling the greatest negative effects. Furthermore, hiring may not return to pre-pandemic levels until 2022 or beyond.
So, what can finance leaders do to better prepare for the “new normal”? One way is to lower the company’s federal tax liability. If your organization is planning to hire new employees, make sure you are taking advantage of the Work Opportunity Tax Credit (WOTC) program today. With WOTC, there are no limits to the amount of credits you can claim, and this tax credit is available to any company with a federal tax liability, regardless of size or industry. Furthermore, if the WOTC credit exceeds the tax liability, a company can carry forward the excess or look back any unused credit.
The Work Opportunity Tax Credit offers businesses a tax benefit for hiring employees from a targeted group who are certified as eligible by a state workforce agency and work for your company at least 120 hours within the first year of being hired. These groups include:
- Qualified (Transitional Assistance to Needy Families) TANF recipient
- Qualified veteran
- Qualified ex-felon
- Designated Community Resident (DCR)
- Vocational rehabilitation referral or a holder of a “Ticket to Work”
- Recipient of SNAP benefits (food stamps)
- Supplemental Security Income (SSI) recipient
- Long-term family assistance recipient (TANF)
- Qualified Long-term unemployed
The WOTC program was recently extended for an unprecedented 5 years. Since the onset of the COVID-19 pandemic, we are seeing an increase in two of the WOTC target groups: SNAP and qualified long-term unemployed. Therefore, the WOTC will be even more valuable to your company than ever before.
But you should not wait to take advantage of this valuable credit. Due to legislative requirements, the WOTC does not allow you to retroactively take advantage of the tax benefits offered. Ensuring you have a solid WOTC program in place now will make an impact on your business down the road as hiring resumes or increases. Now is the time to ensure you are maximizing potential tax breaks offered by the WOTC.
An important component of being prepared is making sure that you have selected the right tax credit partner. Specialists like TCC are experts on the tax code and, more importantly, the nuances of the WOTC program. We partner with your company to ensure that your new hire process includes an in–depth and thorough screening of every applicant for eligibility of the WOTC program. TCC ensures that the required IRS and DOL documents are appropriately filed with the applicable state workforce agency and that they are complete and timely. What should you look for to ensure a WOTC specialist is maximizing your opportunity?
- Are the reports they provide actionable supporting optimal program performance and results?
- Do you have input on the reports that you want to be delivered without an additional charge?
- Do they partner with you to increase the screening of all applicants?
- Do they integrate with your HR platforms seamlessly, quickly, and easily?
- Do they offer custom screening?
- Do they monitor your screening results and state responses to ensure you are capturing all potential tax credits?
- Do they require unnecessary sensitive data from applicants such as their social security number or date of birth?
- Do they understand your business and care about your success?
At TCC, we understand that your company is not in the tax credit business. Our goal is to take this burden off your plate of responsibilities, allowing your organization to focus on what you do best as we migrate to our “new normal”.