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National Restaurant Association - 5 reasons to use the Work Opportunity Tax Credit

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5 reasons to use the Work Opportunity Tax Credit

If you haven’t checked out the federal Work Opportunity Tax Credit lately, now may be the time to take a look. .

The WOTC is a federal income tax credit for businesses that hire individuals from specified target populations. It's aimed at encouraging employers to take a chance on people who may need extra help finding and staying at a job. Eligible employees include ex-felons, veterans, youth in summer jobs, members of designated assistance programs, qualified ex-felons, and others.

The program is a three-way partnership: It's powered by a federal hiring tax credit. The certification process is administered by states. And private employers do the hiring. The WOTC has helped millions of people move into jobs over the years, including in many restaurant companies. It has driven up payroll tax revenues, given employers help in training and retaining valued employees, and yielded bottom-line benefits for businesses.

Employers today report that the credit is easier than ever to use. Here are five reasons to look into the WOTC:

  • It’s a great time to try it out. For years, Congress renewed the WOTC for just a year or two at a time. In 2015, though, lawmakers authorized the credit through 2019. The longer-term commitment has given states confidence to invest in their WOTC systems. Some 30 states have automated at least part of their WOTC processes, making it easier for businesses to apply for WOTC eligibility determinations for their new hires -- a huge improvement over the paper-based, manual process of the past. Businesses in many states can now submit applications electronically and get instant access to WOTC determinations.   
  • The program's scope is wide. More employees may quality for a WOTC credit than you would think. Eligible individuals include food-stamp recipients, individuals referred through vocational-rehab programs, disabled or unemployed veterans, and millions of others. The credit applies to both full- and part-time employees and is based on the number of hours the employee works.
  • You’re not on your own. Many employers work with third-party tax partners and WOTC vendors to manage documentation and file requests for certification. Vendors can integrate the tax-credit process with your other onboarding. If you operate in multiple states, a WOTC expert can help you navigate various state deadlines and submission criteria. Many of these vendors also give your new hires a way to self-identify their potential WOTC eligibility over the phone or online. This can keep the process confidential and respectful for employers who don't want to be intrusive during the hiring process.
  • Consider the benefits. Employment tax credits can be an integral part of your overall tax planning strategy. The WOTC can help you reduce your federal income tax liability by between $1,200 and $9,600 per employee, depending on the target group and the number of hours the employee works. Employees generally need to be employed for at least 120 hours. The more hours an employee works, the larger your credit. There’s no limit to the number of eligible employees an employer can claim per year. These general business credits are available to C corporations as well as flow-through entities like partnerships, S corporations and LLCs.
  • Restaurants are a natural fit. Restaurants are America’s training ground. The nation’s 1 million restaurant locations are the home of both first jobs and second-chance opportunities for people of every background. With an estimated 15.1 million employees, restaurants today employ about one in 10 working Americans. For an industry with such a big impact on the American workforce, the WOTC provides valuable assistance to offset some of the extra costs involved in employing individuals who may need some extra training.

Sponsored content provided by RSM, a National Restaurant Association partner. RSM provides audit, tax and consulting services to middle-market companies.

More insights from RSM:

What the 2017 tax law means for your restaurant business
The 2017 tax reform law may offer restaurant operators new opportunities to save, according to RSM. 

A tip on tips: Remember the FICA reimbursement credit
You may be eligible to claim a credit for a portion of taxes paid on employees' tips, RSM advises.

Taxpayers can deduct 50 percent of their business meal spending, IRS confirms
6 questions about business-meal spending.

Restaurants gear up for sales-tax changes in wake of Supreme Court decision
Sales-tax compliance could get complicated for restaurants that file in multiple jurisdictions.


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