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Small businesses face many challenges when it comes to attracting and retaining talented employees. In order to incentivize hiring and reduce turnover, many federal and state programs offer tax credits and other hiring incentives. One of the most well-known federal hiring incentives is the Work Opportunity Tax Credit (WOTC), which provides employers with a credit of up to $9,600 per eligible employee. However, there are many other hiring incentives available to businesses, such as the Employee Retention Credit, Federal Empowerment Zone (FEZ) tax incentives, and the Federal Bonding Program. In this guide, we’ll explore the differences between these programs and help you determine which one is right for your business.
Overview of the Work Opportunity Tax Credit (WOTC)
The federal government offers the Work Opportunity Tax Credit (WOTC) as an incentive to businesses that recruit people from specific categories who have experienced persistent hurdles to employment. These target groups include veterans, individuals with disabilities, ex-felons, long-term unemployment recipients, and other designated groups. The credit amount varies depending on the employee’s target group, hours worked, and wages earned during their first year of employment. The credit can be as high as $9,600 per eligible employee.
To claim the WOTC, employers must obtain certification from the state workforce agency within 28 days of the employee’s start date. Employers must also file IRS Form 5884 with their tax return to claim the credit. The WOTC is a valuable incentive for employers who are looking to diversify their workforce and provide job opportunities to individuals who have faced barriers to employment.
Comparison to other hiring incentives
While the WOTC is a valuable incentive for employe… Read More
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