In Your Organization, Who Gets all the (Tax) Credit?

December 8, 2020 – Tax and Finance get all the (tax) credit, but HR should be recognized for their role in maximizing employment incentives, the same way they’re recognized for savings in the areas of benefits, unemployment claims and talent management.

So, where does the buck stop in your organization? Once upon a time, that was a much easier question to answer. Today, more often than not, changes in an organization are made with input from a number of stakeholders and across several departments. When it comes to tax credits, the situation is no different. Sure, the tax (or finance) department will be involved, but the buck doesn’t stop there. When digging deeper into the claiming of employment tax credits—and more specifically, hiring tax credits—such as work opportunity tax credits (WOTC), we quickly learn that HR plays a pivotal role.

WOTC is a unique business incentive that can have very material implications for both Tax and HR. The hiring incentive was designed to reward companies for onboarding employees that face some sort of barrier to employment. The numerous qualifying WOTC categories include veterans, unemployment recipients and summer youth employees. Because of the identification, documentation and certification requirements, ensuring compliance with the law is most often achieved with the help of a WOTC services provider.

Work opportunity tax consulting entails weaving the necessary talent acquisition technology and applicant screening into the applicant tracking workflow. Today, fewer organizations take it upon themselves to stand up a WOTC eligibility survey in-house. As one of the few tax credits that cannot be claimed retroactively, WOTC compliance demands that applicants be screened for eligibility on or before a job offer. Documentation of that screening must then be collected and submitted to one of the state certifying agencies within 28 days. Any resulting denials of certification must then be appealed, a process that often entails collecting and providing additional documentation. WOTC FAQs are numerous, and though this employment incentive launched in 1996, no industry-standard approach exists for WOTC screening. IRS form 8850, for example, must be part of the recruiting applicant survey, but its exact placement within the larger framework of HR process technology varies widely among WOTC consultants. That placement can dramatically impact WOTC qualifications. Further, should proposed WOTC legislation expand the unemployment tax credit category, changes must be instituted into the WOTC form 8850 screening. Who qualifies for WOTC, as opposed to who is eligible for WOTC, depends on a particular “know how” and unique set of skills. The effort of preparing the documentation in compliance with established regulations—and ultimately submitting it – can be a heavy lift for an internal team.  

No matter how smart a WOTC services consultant is, the overall success of the program will be directly related to the level of HR buy-in. For Tax and Finance, the benefit is obvious and their direct involvement in the HR technology WOTC solution is minimal. For HR however, maximizing WOTC credit amounts means facilitating coordination between groups like payroll and IT. It also means making decisions on where to place the screening survey for WOTC eligibility. It can include specific customizations to the work opportunity credit questions within the employee recruiting technology. Since HR is, by definition, focused on the employee experience, those leaders will look at the WOTC screening survey through the lens of “how will this feel for the WOTC target groups within our applicant pool?” While the hiring credits are a direct result of the effort HR invested, HR is ultimately a cost center, not a profit center. The performance of an HR department is not usually measured on the value of tax credits they generate.

And yet, HR is routinely recognized for the savings they achieve in the areas of benefits, unemployment claims or talent management. Establishing a best-in-class process for the WOTC screening survey should be seen in the same light. When HR is invested in setting up the best WOTC HR technology, and not just anautomated WOTC service, a few things happen. The financial results improve. Even for companies that, especially in the current environment, are not expanding their workforce, the WOTC credit amounts generated will increase. That’s a fantastic outcome, but perhaps not one that motivates human resources leaders.

Saving time, however, is extremely desirable. Not wasting time frees up strained resources and reduces labor costs. Those may very well be performance metrics that are measured. Since so much time and money is invested in the point of hire, one of the best outcomes of a seamless WOTC technology ATS integration is happy candidates. No frustration, no calls to the IT or HR service teams and no application abandonment. In short, no lost opportunities.

When you think about the Work Opportunity Tax Credit through the lens of all the players involved, WOTC jobs are just one outcome. Generating this hiring credit is also an opportunity for often disparate departments to work together, to support each other and to recognize the investment of colleagues on behalf of the company and its employees.

Learn more about the Work Opportunity Tax Credit (WOTC).

Josh Kaplan is TCC’s Regional Director and has 20 years of experience in technology enabled HR solutions. He helps payroll and HR departments solve challenges around efficiency, data security and reporting.

More Tax Credit Insights

Free assessment

Talk To a Tax Credit Expert Today

Connect with a partner relationship manager to explore our turn-key solutions and integrations.

Get a free assessment