WORK OPPORTUNITY TAX CREDIT FAQ’S

What Does Centivise Do?

At Centivise, we help earn revenue for businesses by simplifying and automating the application, certification and data tracking of the Work Opportunity Tax Credit (WOTC). Since we get paid only after we have obtained government certification AND your employees have qualified for tax credits, you enjoy added revenue that goes directly to your bottom line.

What is the Work Opportunity Tax Credit?

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to any for-profit businesses that hires individuals from certain underemployed target groups who are faced with significant barriers to employment.

What is a Tax Credit?

A tax credit lowers your tax bill dollar for dollar and differs significantly from a deduction. A deduction lowers your taxable income, so its value depends on your tax bracket. For example, if you’re in the 25% bracket, a $10,000 deduction lowers your tax bill by $2,500. But a $10,000 tax credit lowers the bill by the full $10,000, no matter which bracket you are in.

Which Employees are Eligible for WOTC?

• Qualified recipients of Temporary Assistance to Needy Families (TANF).
• Qualified veterans receiving Food Stamps or qualified veterans with a service connected disability who:
  • Have a hiring date which is not more than one year after having been discharged or released from active duty OR
  • Have aggregate periods of unemployment during the one- year period ending on the hiring date that equal or exceed six months.
• Ex-felons hired within one year after conviction or release from prison.
• Designated Community Resident – an individual who is between the age of 18 and 40 on the hiring date who resides in an Empowerment Zone, Renewal Community, or Rural Renewal County.
• Vocational rehabilitation referrals, including Ticket Holders with an individual work plan developed and implemented by an Employment Network.
• Qualified summer youth ages 16 through 17 who reside in an Empowerment Zone, Enterprise Community, or Renewal Community.
• Qualified Food Stamp recipients ages 18 but not 40 on the hiring date.
• Qualified recipients of Supplemental Security Income (SSI).
• Long-term family assistance recipients.

What is the Amount of Credit Available?

The amount of the tax credit varies by target group and is contingent upon the amount of time an employee works for your company. For example, the tax credit for most of the target groups listed above is 40 percent of qualified first-year wages up to $6,000 if the individual works at least 400 hours. If the individual works less than 400 hours but at least 120 hours a tax credit of 25 percent is available on qualified first year wages up to $6,000. Regardless of the target group, our simplified process will help your company earn the maximum amount available.

Why Should My Business Participate in WOTC?

Simply put, we can turn your hiring process into a profit center. There are billions of dollars allocated in federal money each year that many organizations miss out on because they don’t have the process in place to apply.

How are the Credits Distributed?

Generally, in a C-corporation the credits are utilized and if the current year carries a net operating loss, credits can be either carried backwards or held to offset future taxes for up to 20 years. If the business entity is not a C-corporation, the credit passes through the entity to the members as a direct credit to taxes owed. Don’t take our word for it; please check with your individual tax advisor to find out how a tax credit might benefit your business.

Am I Permitted to Use the Tax Credit Even if I Pay Alternative Minimum Tax (AMT)?

Not a problem. The WOTC will offset the AMT.

My business is operating at a loss (NOL). I can’t use the tax credits anyway…….

The WOTC credit may be used for the previous tax year or can be carried forward for up to 20 years. So even if you do not use it now it can benefit your business for decades to come.

Do Credits Apply to Current Employees?

No. The WOTC was designed as a new hire incentive. We have 28 days from the date of hire to fully process new employees.

Will My Company Have to Change Our Current Hiring Practices?

Hiring practices will not have to change, but we work closely with you and your hiring staff to ensure compliance with the process.

How Much Work Will This Create For My Company?

Each new hire will need to fill out 1 additional form at their new hire orientation – average time for both new hire and manager – 8 minutes.
Your management team should have each new hire complete and sign IRS form 8850 (We will provide all paperwork ahead of time to each location) and mail it to our office (IRS guidelines require original signatures on this document).

Can’t My Company Just do It In-House?

Most companies do not take advantage of tax credits and incentive programs because they don’t have the time, knowledge or resources to manage or comply with the application, certification and record keeping process. In addition, if a company operates in multiple states, each state may have different procedures to qualify. We stay current on all state rules, regulations, deadlines and paper processes, allowing you to run your business while we help you capture revenue for qualifying new hires.

Can My Company’s CPA Provide This Service?

They could, but they probably won’t. WOTC is a human resource function, not a tax function. Most business tax preparation organizations will provide an analysis of write-offs, deductions, and tax breaks your business is entitled to. But—and this is important—they will not be able to provide tax credit information for your workforce, because some of those credit claims need to be submitted within a specific time-frame after hiring, and others need to be monitored on some pre-defined frequency. Your tax preparer was likely not involved early enough in the process to help you with it, or doesn’t have the resources to monitor your employees’ eligibility on an ongoing basis.

Will I get audited more often?

We minimize any potential exposure and still allow your business to maximize its potential tax credits. These credits were established by the government in an effort to encourage hiring, and would not be a used as a mechanism to create hardships on businesses. The country’s largest employers routinely utilize these credits and would not open themselves up to an additional risk if it could be avoided.

How Much Will This Cost?

We only make money when you do. Our fee is based on a percentage of what we are able to secure for you. In addition, our fees may be tax deductible.

What About Discrimination When Asking the Qualifying Questions?

These programs were established by federal and state agencies to encourage hiring from targeted groups. The questions were carefully designed in a manner that does not discriminate based on any EEOC classifications.

My employees are leased. Am I still entitled to tax credits for them?

According to the IRS, your role is that of the common law employer, and thereby entitled to the tax credits for that employee. The common law employer is defined as the party who does the hiring, firing, determines pay, and manages the day-to-day functions of the employee.

Are there any deadlines involved with the WOTC?

The Department of Labor requires that the IRS-8850 must be submitted within 28 days of the new hires start date. Unfortunately, there is no flexibility in the deadline and all available tax credits will be lost if it is missed.