WOTC Frequently Asked Questions
What is the PayNorthwest WOTC Solution?
For which credits do you screen?
Work Opportunity Tax Credit
Our most popular tax credit, the Work Opportunity Tax Credit program, incentivizes employers to provide employment opportunities to various groups of disadvantaged applicants. In return, the business or business owner receives a one-time tax credit of $2,500-$9,600 per employee.
Qualifying candidates include:
- Disabled veterans
- Wounded warriors
- Veterans on SNAP (food stamps)
- Unemployed veterans
- TANF recipients
- SNAP (food stamp) recipients
- Vocational rehab individuals
- SSI recipients
- Summer youth employees
- Long-term unemployed
Federal Empowerment (FEZ) Tax Credit: The Federal Empowerment (FEZ) Tax Credit program incentivizes employers whose employees live in and work in geographic regions. This recurring tax credit could mean up to $3,000 a year per qualified employee.
The Federal Paid-Leave Tax Credit: The Federal Paid-Leave Tax Credit is applicable to employers who pay >50% of an employee’s wages while out on leave.
The Employee Retention Credit: The Employee Retention Credit is applicable to employers whose operations were impacted by the recent hurricanes or wildfires and continued to pay employees even when operations were shut down.
Why have I never heard of WOTC?
Due to the fact that many tax credit processors have not built a streamlined, automated process, they are unable to serve an employer that hires less than 500 people. This means that organizations, like a 500 person Jiffy Lube franchise, go without ever knowing about the program!
Would my CPA do this for me?
What do you mean by 'Hassle Free'?
Without the PayNW Work Opportunity Tax Credit Solution
Let’s review how “fun” the process is, so you have a better understanding of how we make it easier.
- The applicant/new hire completes a government form called the 8850. This indicates whether or not they are eligible for the tax credit. In terms of how easy or hard this form is to fill out, consider trying to do your personal income taxes without a tool like TurboTax.
- Next, during on-boarding the employer gets any required evidence from the new hire. For instance, if the new hire is eligible for a veteran tax credit, he/she would need to provide proof that he/she served.
- Then the employer has to submit all the paperwork in the correct format to the state workforce agency (within the deadline), and follow through on ensuring the person gets certified for the credit. If they don’t get certified, their wages can’t be claimed as a credit.
- From there, the employee needs to work the minimum threshold of hours (which varies by tax credit category) to begin earning his/her employer a credit. Typically, the minimum threshold is 120 hours (roughly ~3 weeks of service). As an FYI, the employee continues to earn additional credits as he/she continues to work but there is an upper threshold. This is typically 400 hours or ~10 weeks.
- As the employee works, the employer needs to capture the hours worked and the wages paid to the employee. This is typically done through manual reports pulled from a timekeeping system and a payroll platform.
- At the end of the year, the employer bundles up all of the hours worked, and all of the wages paid and provides them to their CPA.
- The CPA files the WOTC tax credit on the corporate return.
You might be saying… ‘That seems straight forward enough!’… but, think about doing this for 1,000 new hires every year. It can be a laborious process.
With the PayNorthwest service
Let’s take a peek at how it would work with the PayNW Work Opportunity Tax Credit Solution.
- The applicant/new hire completes an intuitive, user-friendly survey online or on their mobile device. This walks them through the questions and pre-qualifies the 8850.
- HireCredit works directly with the employee to get the evidence. It can be as easy as the new hire taking a picture with their cell phone!
- HireCredit deals with submitting all the right paperwork to the government agencies at the right time.
- Forget the payroll reports or timekeeping reports, with the PayNW cloud HCM platform, data is pulled nightly to maintain up-to-date information to help clients maximize credits available.
- The relevant payroll data is aggregated, calculated, and sent to the CPA for filing.
What do you mean by 'Earn More Credits'?
- Pre-Hire Decision: Yes… you can make a hiring decision based on tax credit eligibility! This is the whole purpose of the program and is not considered discrimination. Basically, the government wants a hiring employer to say “Applicant A and Applicant B have the same skill
sets. Applicant A is tax credit eligible (which means he/she is statistically disadvantaged for getting a job) so I will give him/her the job.” Most employers do not know this, and most processors are not set up to allow for applicants to take the qualification survey pre-hire. HireCredit educates the employer and applicant and allows the employer to make more informed hiring decisions
- Hitting the Minimum Hours: Most processors ask employers to provide the hours worked and wages paid quarterly. But, what if you are trying to get the tax credit eligible employee to the minimum threshold? Wouldn’t it be nice to know that you have Bill at 110 hours and Corey at 130 hours? Since we pull data every single day from the PayNW system, we can tell your teams who needs more hours to hit the minimum.
- Hitting the Maximum Hours: The same logic applies here. You want every tax credit eligible employee to work as many tax credit eligible hours as possible. Again, since we are pulling data daily not quarterly, we can provide that information so the employees hit the booster.
How do I use the credits? What if I don't have a profit this year?
In what languages is the survey?
Is the program offered globally?
Is my company a good fit for PayNW's WOTC Solution?
- Are you in an industry with moderate to high turnover? Any organization that experiences high turnover (e.g. manufacturing, construction, food service, retail & hospitality, staffing, health care, long term care) would be a great fit.
- How many new hires do you have each year? We can estimate the tax credits for you from this number.
- Do you have seasonal hiring? Since the tax credit is based on new hires, any organization that experiences spikes in hiring is a good candidate.
- Did you recently, or are you about to, acquire a business or get acquired? Any change in the filing FEIN means the entire population is screenable for tax credits.
- Are you a for-profit business? If you are, then this service is for you. Nevertheless, not-for-profits can still take advantage of the tax credit for qualified veteran hires and apply those credits to offset quarterly federal payroll taxes.
What is the upfront cost?
Do I need all of the PayNW modules (payroll, time, HR, benefits, scheduling) to earn tax credits?
How does PayNW's WOTC Solution stack up to the competition?
There are two key differentiators:
- We help employers earn more credits. This is through our pre-hire qualifications, scheduling insights and hours maximization. See “What do you mean ‘Earn More Credits?'”
- We work with organizations of any size. Most tax credit processors require a minimum of 500 new hires per year. This makes the tax credit unattainable for most organizations. We have no minimums since our solution is paperless and automated.
Are there any software requirements?
- Placing the survey link multiple places (e.g. applicant tracking, on-boarding)
- Connection to your timekeeping module. In many cases, this happens automatically thanks to the connection built into the PayNW HCM system. This allows us to do the scheduling insights and tax credit booster maximization.
How is the service priced?
Is there an implementation fee?
What's the contact for sales-related questions?
Why wouldn’t an employer just do this themselves and avoid paying the fee?
We help you earn more credits by:
- Identifying pre-qualified, tax credit eligible workers before you make your hiring decision,
- Telling you who you need to schedule so they hit the minimum threshold, and
- Making recommendations on how to hit the maximum hours threshold.
I don't think this program is applicable to me.
How long is set up?
As for the payroll & timekeeping information there’s no additional work. We have already built the integration and would just need to “turn on” the connection with your company account in the PayNorthwest system.