WOTC / Employment Tax Credits
Service description
Screens new hires to see whether they belong to a group the tax code targets, such as certain veterans, SNAP recipients or people with past felony convictions, and helps the business request certification from the state workforce agency. While the credit is authorized, each certified hire can earn the employer a federal tax credit on part of the hire's first-year wages.
Common industries
Any business that hires steadily, especially retail, restaurants, warehousing and healthcare.
ROI
For businesses that hire steadily, a per-qualified-hire credit adds up across the year with a light, repeatable process.
Benefit
Screen new hires against federal target groups to claim the Work Opportunity Tax Credit and related hiring incentives — high-volume, built into onboarding.
Why get it
An employer that hires from the targeted groups can lower its federal income tax, but only if each hire is screened and certified within a short window after the start date, which is easy to miss. Screening every new hire keeps the credit available.
When you benefit
Ongoing while the credit is authorized: each hire is screened at onboarding, certification is requested within 28 days of the start date, and the credit is claimed on the return.
What it costs
Per certified hire.
When you pay
Commonly a contingency: the provider is paid only for hires the state certifies, either per hire or as a percentage of the credit claimed, and is typically billed after the credit is claimed. Some providers charge a flat subscription for screening instead.
Other costs
Staff time at onboarding to complete the pre-screening form, and any hiring-system integration a provider charges for.
Risks to know
Missing the 28-day certification deadline forfeits the credit for that hire, and a credit claimed without certification can be disallowed. The credit is also not permanent: as of this writing it does not cover people who start work after December 31, 2025, unless Congress extends it, which it has done before.
When risks arise
The 28-day window starts on each hire's first day of work, so the risk repeats with every hire. Whether the credit is available for hires after 2025 depends on Congress, so its status should be checked before relying on it.
The process
Each new hire completes a pre-screening form during onboarding, and the provider or the business submits it to the state workforce agency, which decides whether the hire qualifies. The provider tracks certifications, and the business claims the credit on its tax return for certified hires.
Your commitment
The business has each new hire complete the pre-screening notice as part of onboarding, and submits it to the state workforce agency on time. It provides hire dates and wage records, and gives the provider access to onboarding data.
Documents to gather
- Completed pre-screening notices (IRS Form 8850) for each new hire
- Hire dates and start dates for each employee
- Payroll records showing wages by employee
- State certification determinations received
Helpful reading
- The Work Opportunity Tax Credit — Congressional Research Service
- Employers must certify eligibility of new hires to claim the Work Opportunity Tax Credit — Internal Revenue Service
Further research
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