Over the last year, we’ve seen a number of government programs designed to assist the restaurant industry with grants and loans. For many years prior, however, there’s been an offering of tax credits for hiring and employing certain groups of individuals that has been extremely underutilized. During this episode of The Tip Share, RASI Partner Efficient Hire’s Chris Woltz, Chief Operations Officer, and Amber Ankele, Director of Services Operations, join RASI Director of Partnerships, Brad Bertram to discuss the Work Opportunity Tax Credit, or WOTC as it is most commonly referred to.
WORK OPPORTUNITY TAX CREDIT (WOTC) FAST FACTS:
- WOTC is a ~30-year-old federal program designed to encourage employers to employ people in certain 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 is able to put people back to work
- The Employer is able to receive a tax credit
- The Employee is able to get to re-establish themselves as a contributing member of society with employment
HOW CAN RESTAURANTS 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
- To learn more about caps and expectations on WOTC click HERE
- WOTC eligibility screening is a self-attestation; once that’s completed, the restaurant submits paperwork to a state workforce agency who then determines eligibility
- 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
WHAT TARGET GROUPS ARE WOTC ELIGIBLE?
- SNAP Recipients
- Long-Term and Short-Term TANF Recipients
- 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
WATCH THE FULL VIDEO BELOW TO LEARN HOW SOME RESTAURANTS STRATEGICALLY PLACE THEIR TAX CREDITS THROUGHOUT THE YEAR:
HOW IS THE WORK OPPORTUNITY TAX CREDIT 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
WHAT IS THE TIMEFRAME FOR WOTC TAX CREDIT USE?
- 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