As the end of the year approaches, we may see the Work-Opportunity Tax Credit (WOTC) go into hiatus after December 31, 2019 because Congress may fail to extend the tax credit program. However, that doesn’t mean employers should stop their WOTC processes. History shows that the program will likely be reinstated by Congress sometime next year.
Since the WOTC program was first implemented in 1996, it has gone into hiatus seven different times, only to be renewed by Congress each time.
If there is a WOTC hiatus, employers should continue to screen candidates in preparation for the program being restored and tax credits being allowed by the IRS to be applied retroactively. The only real difference between the program being in effect and being in hiatus is State Workforce Agencies (SWAs) cannot process the WOTC certifications necessary to claim federal tax credits. As many employers know, WOTC certifications can sometimes be delayed so the hiatus shouldn’t make all that much of a difference for employers as long as the tax credit program is renewed in 2020.
For employers that are unable to screen candidates within the normal 28-day time frame, they will likely be able to capture that information at a later date for their applications to State Workforce Agencies. Historically, once WOTC is renewed, the IRS creates a transition relief period in which employers are allowed to screen their candidates hired during the tax year outside of the 28-day time window.
Here is an example.
If WOTC goes into hiatus following December 31, 2019, but is renewed in April 2020, the IRS could create a transition relief period between the months of January and March to allow employers to screen all of the employees they hired during that time to see if they qualify for a WOTC certification.
The question employers should be asking themselves regarding WOTC is not if the program will be renewed, but when and how to best prepare for the transition period to best capture all of their newly hired employees who may be eligible for federal tax credits.
Employers that are not currently administering a WOTC program are missing out. Those employers using WOTC can receive tax credits up to $9,600 per qualified candidate. According to the DOL, employers in 2018 obtained 2.2 million WOTC certifications, representing billions of dollars in federal tax credits.
Employers who are seeking more information about the WOTC program or have questions about what to do if WOTC goes into hiatus can find help by clicking here. To learn how WOTC can be an asset for your business, click here.