De-Mystifying the Work Opportunity Tax Credit (WOTC)
Ever experience the exhilaration of finding a long forgotten twenty dollar bill hidden in a pocket? Jeff Newcorn is an expert in uncovering what he calls “found money” for companies and claims (pun fully intended) to be quite passionate about it. His firm, R. Jeffrey & Associates, specializes in helping employers access Work Opportunity Tax Credits (WOTC). WOTC is a federal tax credit program that benefits companies located in low-income communities and/or who hire people with barriers to employment. Those employee groups include veterans, food stamp and welfare recipients, disconnected youth, recent ex-felons, and residents of Federal Empowerment Zones, Renewal Communities and Rural Renewal Counties. In the interview below, Jeff describes the WOTC program and his mission to make these tax incentives more accessible to a broad range of small and medium sized companies.
TalentRISE: What does WOTC actually do?
Newcorn: This is a federal program designed to incent businesses to hire individuals from eligible target groups by reducing an employer’s federal income tax liability by as much as $9,600 per employee hired. There’s no limit to the number of people an employer can hire under the program. So, the program is a win-win-win on multiple fronts: for employers who get a tax break, for people who will now get hired and for states since putting more people to work decreases the benefits that states must otherwise pay out.
TalentRISE: What’s the typical profile of a company that is eligible for WOTC?
Newcorn: Companies of any size that hire a significant portion of their workforce at entry level or lower/near minimum wage may be eligible for credits. These are businesses that typically experience high turnover and operate in industries such as food service/restaurants, retail, staffing, janitorial and entry level healthcare jobs. Their workers often have had fairly significant challenges finding work and the program is designed to incent employers who hire from this population. For example, about 80% of employees who generate WOTC for businesses are currently using food stamps. Veterans, while statistically a small portion of the possible pool of employees that can generate eligibility for credits, are in a separate and more generous category. While not-for-profits are exempt from federal taxes, they too can receive some benefits through this program because the federal government will match social security taxes for those that hire veterans. If your business is included in any of these categories, you should definitely talk to your accountant or other advisors about the possibility of being eligible and then taking the steps to track, calculate and claim these credits.
TalentRISE: How many companies do you think are eligible, but (for whatever reason) aren’t collecting the credits?
Newcorn: Larger companies seem to utilize the program more. Walmart, for example, has committed to hire 100,000 veterans and certainly has a process in place to collect the tax credits that are due to them. Overall, it’s hard to put a number on it but many small companies don’t even know that the WOTC program exists or they don’t understand how it works. I think it’s really a matter of awareness and also a lack of actionable information about how to make the program real. Frankly, the program has not really been “sold”. The IRS and most CPA organizations don’t market or promote tax credits.
Another reason some smaller businesses are initially reluctant to use the program is that it used to be more complicated to obtain and process the WOTC paperwork. Today, with the technology available in 2015, that objection that really has no merit. The process is simple. At my firm, we have clients ask their new eligible hires to fill out a six question (web-based) electronic survey. It takes 90 seconds. Then, my team loads the information into the government system along with payroll data that clients stream to us through a secure feed. We calculate the data for all individual workers who are certified through the system and we then provide the credit-earned report to our clients.
Finally, although less frequently, I also hear yet another objection: some small business owners don’t want the credit because they don’t feel entitled to it. The truth is, that as business taxpayers, they are indeed entitled to it. They’re paying into the system via taxes so they should get back what they are entitled to receive under the law.
TalentRISE: How do you work with clients? Who is generally your internal contact and how do you engage with them?
Newcorn: My role is to educate, administrate and ultimately calculate the credit. Finance and HR are typically involved in the first steps since we need data regarding hiring processes and payroll. HR is then somewhat more involved in the administering. Finance and the tax department are always, but not surprisingly, interested in the results.
TalentRISE: How did you get into this business?
Newcorn: A friend who was working with companies to claim Job Training credits told me about this back in 1998. I quickly assumed that most small businesses were unaware about business credits and incentives. And, I was right. With my accounting background and previous experience in corporate finance, plus my software skills, I saw an opportunity and have been an evangelist for the program ever since.