Tax savings and other benefits to employers
The Work Opportunity Tax Credit program reduces an employer's cost of doing business and requires little paperwork. The success and growth of this federal income tax credit for private-sector employers depend on a strong public and private sector partnership. Helping those in need find and retain jobs and gain on-the-job experience benefits all employers and increases America's economic growth and productivity.
Employers qualifying for the Work Opportunity Tax Credit can expect the following tax savings, depending on the target group of the participating employee.
For all Target Groups except the following
Target Group B. Veterans-Disabled
Target Group F. Summer Youth
Target Group I. Long Term Family Assistance Recipient (LTFI)
The tax credit applies to the first year of employment only. Wage is capped at the first $6,000 of qualified wages. The maximum tax credit is $2,400 per new hire.
Full credit is calculated at 40 percent, up to $2,400; employees are required to work a minimum of 400 hour or more.
For a partial credit of 25 percent up to $1,500 and it requires a new employee to work at least 120 hours but less than 400 hours.
For the Target Group B. sub-group Qualified Veterans - Disabled Veterans, the wage cap is the first $12,000 of qualified wages. Maximum tax credit is $4,800 per new hire.
Full credit is calculated at 40 percent, up to $4,800 and requires the new employer to work 400 hours or more
Partial credit is calculated at 25% up to $3,000 and is for those employees who work at least 120 hours but not more than 400 hours for the employer.
For Target Group F - Summer Youth, the Tax Credit applies to any 90-day employment period between May 1 and September 15. The wage cap is the first $3,000 of qualified wages with a maximum tax credit of $1,200 per new hire.
For Target Group I - Long-Term Family Assistance (LTFA) Recipients, the tax credit applies to the first two years of employment, and is considered to be a two-tiered tax credit. The wage cap is the first $10,000 of qualified wages in each year. Maximum credit over two years is $9,000 per new hire.
For the first year of employment, the maximum credit is $4,000.
Full credit is calculated at 40 percent, up to $4,000, and requires the new employee to work at least 400 hours for that employer.
Partial credit is calculated at 25 percent, up to $2,500 and requires the new employee to work a minimum of 120 hours but not more than 400 hours for the new employer.
For the second year of employment, the maximum credit is $5,000.
50 percent of $10,000 up to $5,000
Proven benefits to South Dakota employers and employees
The implementation of the Work Opportunity Tax Credit (WOTC) program has proven to strengthen qualifying job seekers' ability to gain employment they otherwise probably would not have obtained. Job seekers previously considered lacking skills and abilities, having an image associated with receiving welfare benefits or being an ex-felon, or having a disability to employment, simply were not hired because they were considered too much of a risk. The hard to place job seeker can use the WOTC program as a tool to gain employment in what otherwise would be a losing situation.
The Work Opportunity program has been shown to be a win - win situation for both employers and job seekers alike. With poor economic conditions and high unemployment rates across the nation the WOTC program continues to assist employers with a boost to their bottom line with millions of dollars in federal income tax savings to help grow our economy.
Just by hiring a new employee with some type of disability or barrier to employment the WOTC program helped the new employee enter the job market and gain experience, and resulted in 3,746 applications being certified and utilization of the benefits of WOTC program for those new employees helped save South Dakota employers an estimated $9,414,800.00 in 2010.
We need your input to make the Work Opportunity Tax Credits work. Let us know how we can improve their value to you and your employees. Please call or visit the WOTC coordinator at your local South Dakota Department of Labor and Regulation office or contact your South Dakota state coordinator.
Other opportunities for employers to help employees
Help your employees make ends meet by offering them the Advanced Earned Income Tax Credit (AEITC). For more information contact the IRS at 800.829.1040;
Download Publication 596 from www.irs.ustreas.gov.
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Pierre, SD 57501-2291
Tel. 605.773.3101
Fax. 605.773.6184
