The Federal Work Opportunity Tax Credit (WOTC) was originally introduced in 1996 as a replacement for the Targeted Job Tax Credit. The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring and disadvantaged individuals who have historically faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

Often times is easy to overlook best practices and process improvements when programs like WOTC have been around for nearly 20 years. Here are 5 tips to help maximize this tax credit for your organization.

1. Cast Vision before Expectation – With any initiative or new project, it is important for key stakeholders to understand the “Why” before the “How” or “What” (Sinek, 2011). Casting the vision before the expectation helps create alignment on the value of the new initiative. With the WOTC, it is important to understand the potential tax credit opportunity in relation to the actual work required.
2. Habit Stack the Process – The WOTC requires new hires to complete paperwork as part of the tax credit certification process. It is important for companies to think strategically about the best, most efficient way to gather this information. Author James Clear coins the idea of “Habit Stacking” as incorporating a new habit into an existing habit (Clear, 2018). Organizations will often include the WOTC new hire process into an existing onboarding process. It is vital for companies to not only be strategic about where to incorporate the WOTC, but also to resist choosing convenience over efficacy. The WOTC should be included in the onboarding process; however, companies must consider if it is better to include it in an HRIS process or if a mobile-first process is a more effective solution for their organization. These are some questions to examine when implementing WOTC for the first time or simply reviewing current WOTC processes.
3. Zero Missed Opportunities – The WOTC program has a very short and specific window to gather and submit pre-qualified new hires to the State Workforce Agencies for certification. In order to avoid missed opportunities by failing to submit pre-qualified new hires within that window, companies need to adopt systems and protocols to regularly compare WOTC new hire submissions to actual company new hires. In addition, companies must take measures to ensure that all required supporting new hire identification is gathered and submitted during that period of time as well.
4. Avoid Auto-Pilot – To maximize the WOTC, companies must avoid having processes that start but then fall to the wayside due to the appearance of automation. The guise of full automation and integrations with WOTC is very alluring. There is a significant risk of auto-pilot disaster if companies lean into a fully automated process since there are many intricacies that happen with WOTC behind the scenes. Without human oversight in addition to WOTC Technology, it is easy to fall into the assumption that everything is running smoothly according to the planned automation, when in fact there is a risk some actions that should be happening are not taking place. Human oversight paired with WOTC technology allows companies to ensure that what should be happening is happening, ranging from the new hire submissions to the proper delivery and claiming of the tax credit.
5. Establish Regular Reviews – With any important process, a company must regularly inspect what is expected to happen. Whether it is either a simple review of key metrics or an in-depth review meeting, looking at submissions, pre-qualified employees, State Workforce Agency decisions, and potential tax credits is an essential part of the review process.

I hope these 5 tips benefit your organization as you review your current WOTC process or consider adding WOTC to your tax credit portfolio. Please contact us directly if you need assistance with WOTC or would like a free WOTC review.

References:

1. Simon Sinek’s Golden Circle: Sinek, Simon. Start with Why: How Great Leaders Inspire Everyone to Take Action. Penguin Books, 2011
2. Federal Work Opportunity Tax Credit: United States, Department of the Treasury, Internal Revenue Service. Work Opportunity Tax Credit. IRS, https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax- credit. 2024.
3. James Clear – Habit Stacking: Clear, James. (2018). Atomic Habits: an easy & proven way to build good habits & break bad ones (PDF ed.). New York: Avery