Strategies for the Work Opportunity Tax Credit (WOTC) Success

The Work Opportunity Tax Credit (WOTC) is a federal income tax credit available to employers who hire individuals from certain targeted groups that have historically faced barriers to employment. The purpose of WOTC is to promote inclusive hiring practices by offering a financial incentive to employers that provide job opportunities to those who need them most.

The credit is based on the wages paid and the hours worked by qualifying employees. Importantly, organizations are permitted to consider WOTC eligibility during hiring decisions.

Key Takeaways

• WOTC provides valuable tax incentives for hiring individuals from targeted groups
• Any employer hiring W-2 employees may be eligible
• Our partnership with Federal Credit Advisors simplifies WOTC compliance
• Even entities hiring only a few employees a year can benefit

EisnerAmper Partners with Federal Credit Advisors

EisnerAmper has partnered with Federal Credit Advisors (FCA), whose OnTrack platform simplifies WOTC screening, compliance, and reporting. Designed to accommodate employers of all sizes, OnTrack automates data collection and minimizes administrative burden, making it easier than ever to apply, track, and maintain compliance for this tax credit.

Thanks to this partnership, EisnerAmper clients gain a secure and efficient way to maximize their WOTC participation. Additionally, OnTrack can identify eligibility for certain state-level hiring incentives, with EisnerAmper ready to assist in processing and claiming these additional benefits.

Who is Eligible?

WOTC eligibility applies to any for-profit employer hiring W-2 employees, regardless of organization size or industry. Employers do not need to create new positions — simply hiring a qualifying candidate is sufficient.

Eligible new hires must fall into one of the following categories:

• United States Military Veterans
• Designated Community Residents
• Long-Term Unemployment Recipients
• Vocational Rehabilitation Referrals
• Supplemental Security Income (SSI) Recipients
• Supplemental Nutrition Assistance Program (SNAP) Recipients
• Short-Term Temporary Aid to Needy Families (TANF) Recipients
• Long-Term TANF Recipients
• Community Re-Entrants
• Summer Youth Employees

The credit has been expanded over the years, so that, in some cases, 35% or 50% of an organization’s employment hiring group may qualify. To be eligible, it is a matter of whether your employees qualify, which is determined through anonymous surveys.

What About Nonprofits?

While WOTC is generally a federal income tax credit for for-profit employers, qualified 501(c)(3) nonprofit organizations can also benefit, specifically when hiring qualified veterans. In this case, the credit is applied against the nonprofit's share of Social Security tax owed for the qualified employee. This enables tax-exempt employers to reduce payroll costs while supporting veteran employment. Nonprofits follow the same application and certification process as for-profits, and, with the help of platforms like OnTrack, the administrative burden is minimal.

How it Works

FCA facilitates the initial screening process by integrating simple, automated surveys into onboarding or recruiting workflows. These surveys must be completed before the new hire’s 28th day of employment to be eligible.

Once a candidate is identified as qualifying, the application is submitted to the appropriate state workforce agency for certification. Although WOTC is a federal credit, certification is handled at the state level — a process that varies widely. FCA’s technology delivers accurate, timely submissions across all states, adapting to evolving requirements.

To increase engagement, the FCA uses tools such as automated reminders via text and email to encourage survey completion. Depending on the employer’s preferred technology, data collection can be customized:

• For those using Intuit QuickBooks, FCA can integrate directly to pre-fill basic information. 
• For employers with limited technology, employers can display a QR code for new hires to scan and complete the survey on their mobile devices.

The goal is to have every eligible new hire complete the questionnaire within the 28-day window.

In 2023, almost 2.0 million WOTC certifications were granted by states nationwide. Once certified, the employer receives a formal document to claim the credit. For C corporations, WOTC reduces corporate tax liability. S corporations and LLCs can pass the credit through to the owners’ personal returns.

Getting Started

Our partnership with FCA allows us to provide effective solutions to optimize participation with the WOTC, regardless of an organization’s size.

If your organization has already passed on WOTC, it is worth revisiting. EisnerAmper professionals make the application process easy, with high financial rewards if you qualify. Contact us today to discuss how we can support you.

This article was written in collaboration with Justin Zucca, co-founder of Federal Credit Advisors.