Tax and Credits with pen, glasses, and calculatorOver the last year, we’ve seen several government programs designed to assist the restaurant industry with grants and loans. For many years prior, however, there’s been a highly underutilized offering of tax credits for hiring and employing certain groups of individuals. In the post, learn more about the Work Opportunity Tax Credit, most commonly referred to as WOTC.


Work Opportunity Tax Credit (WOTC) Fast Facts

  • WOTC is a ~30-year-old federal program designed to encourage employers to employ people in specific demographics
  • WOTC helps targeted employees move from economic dependency to self-sufficiency while earning a steady income and becoming contributing taxpayers
  • WOTC provides employers incentive in the form of a tax credit to drive cash flow through retention and eligibility
  • WOTC was started in the ’90s and has recently been renewed for an additional five years
  • WOTC has gotten support on both sides of the aisle because of its across-the-board beneficial nature
    • The Government can put people back to work
    • The Employer can receive a tax credit
    • The Employee can re-establish themselves as a contributing member of society with employment

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How restaurants can benefit from WOTC

  • A restaurant can hire a target group WOTC eligible candidates and employ them for over 120 hours in their first year of employment, and they will be able to receive a percentage of those wages
  • WTOC can reduce the company’s tax liability by up to $9,600 per qualified employee
    • This varies, dependent upon how long an employee works for the restaurant and what target group they’re in
  • WOTC can be used as a tool to drive ROI into every hire and offset some of the employee acquisition cost
    • The current hiring environment is challenging, and generally speaking, restaurants (no matter if you’re independent, fast-casual, or QSR) are having to advertise and outcompete to win-over qualified applicants, which ultimately costs money

WOTC eligible target groups

  • SNAP Recipients
  • Long-Term and Short-Term TANF Recipients
  • Veterans
  • Ex-felons
  • SSI Recipients – supplemental security income
  • Long-term unemployed (27+ weeks)
  • Designated community resident – a person who lives within a specific qualifying zone
  • Employees who work with a vocational rehab within their state
  • Summer Youth Program


How the Work Opportunity Tax Credit is calculated and claimed

  • Manual (VERY complex)
    • Screen new hires for eligibility (complex)
    • Submit eligible employee documentation to state workforce agency (complex)
    • Obtain decision from state workforce agency and process additional documentation needed (complex)
    • Calculate eligible hours, wages, and credit
    • Complete applicable tax reports and forms (complex)
  • With Efficient Hire (streamlined & online)
    • Native screening within recruiting and onboarding processes ensure 100% screening
    • In-house and seamless execution of application submission, decision obtainment, and credit calculation
    • Detailed monthly and year-end reporting and account manager consultation to support ongoing optimization of credit

WOTC tax credit usage timeframe

  • WOTC has a 2-year carry-back rule and a carry-forward rule for 20 years; so if you can’t use it this year, you can carry it forward