Definition
Employer incentives for hiring from underserved groups and retaining employees during economic disruptions.
What are Tax Credits?
Work Opportunity Tax Credit (WOTC): A federal tax credit for hiring individuals from targeted populations such as veterans, recipients of the Supplemental Nutrition Assistance Program (SNAP), and long-term unemployed workers.
Employee Retention Credit (ERC): A now expired credit that helped businesses keep employee on payroll during the COVID-19 pandemic.
Why are Tax Credits Important for Employers?
- Encourage hiring from diverse and underserved talent pools
- Improve cash flow and overall financial health
- Help businesses stay competitive and invest in growth
- Offset costs related to employee retention and workforce development
- Support compliance with government hiring incentives and programs
FAQs
What is the WOTC and who qualifies?
The Work Opportunity Tax Credit incentivizes hiring individuals from targeted groups, like veterans or long-term unemployed persons.
What is the ERC?
The Employee Retention Credit was a pandemic-era tax credit for businesses that kept employees on payroll during COVID-19 disruptions.
How can employers claim these credits?
Through IRS Form 5884 for WOTC and Form 941-X for ERC, supported by proper documentation and wage records.
How ExtensisHR Can Help
We support small businesses with:
- Identifying eligibility for credits
- Managing documentation and filing
- Integrating eligibility with payroll records