Raise your hand if you feel like you’re living through a sales tax nightmare as we’re in the post-Black Friday and pre-Christmas window of chaos. (While I can’t see your raised hand, I can certainly feel it.)
Which only makes sense: You have to pay attention to a lot of details, all while handling an atypical volume of sales. Stress and mistakes are inevitable. And If that’s where you’re at, my and I are here to offer relief… calendly.com/ralfheyer/30-minute-meeting
Or, if you prefer more of a hands-on approach, you might look into the IRS’s Business Tax Account (BTA). It’s a handy digital service meant to help you keep your tax obligations met – you can look at your balances due, your payment history, make electronic payments, and a lot more.
In the IRS’s opinion, the BTA is the way to go for every business owner. But if you’ve read many (or even a few) of my writings, you already know – there’s never a one-size-fits-all solution when it comes to taxes.
So, if you need tax help with a personal touch, you know a reliable Southeastern FL tax pro you can call to help you out (ahem).
And if you’ve been keeping up with my writings lately, you’re probably pretty familiar with the end-of-year tax moves you should be making. Because up until now, the 2024 finish line was the issue at large.
And that’s still true – but it’s now time to start thinking ahead to a tax-smarter 2025 (and what credits you can take advantage of – which of course, I’ll be your guide to).
Today I’m sharing more about the Work Opportunity Tax Credit (WOTC). This one is a strong potential for you if you have a passion for making an impact bigger than yourself.
Is the Work Opportunity Tax Credit Right For Your Southeastern FL Business?
“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett
Running a business is about more than cash flow and bottom lines, as you well know.
Beyond financial success, one of the things that makes running your Miami Metropolitan business worthwhile is the way you invest in others – especially in those you hire. You’re uniquely positioned to make a lasting impact on their careers and their lives.
And, the government has deductions and credits that you can sometimes claim for that kind of care, such as The Work Opportunity Tax Credit (WOTC) – which I want to talk more about today – along with some others (which I’ll discuss more in the coming months).
As far as the WOTC goes, if you bring individuals onto your team who typically struggle to get jobs – like veterans, ex-felons, or recipients of government assistance, as examples – the IRS offers you a little kickback in your tax burden.
But of course, hiring these individuals is about so much more than the tax boost. The REAL benefit is seeing their lives changed for the better as you offer them growth opportunities that others won’t. It’s about how your business can make an impact that really lasts.
What is the Work Opportunity Tax Credit (WOTC)?
The WOTC is a dollar-for-dollar tax credit for hiring individuals from certain groups that the IRS specifies. As of right now, the credit is good for the taking until the end of 2025 (although the historical pattern of Congress has been to extend it when it’s close to expiring).
How much you’ll get from the credit varies – it depends on the target group of the employee, their qualified wages, and how many hours they work (and is calculated by a percentage determined by these factors).
It ranges from a 1.2k boost for summer youth employees to 9.6k for veterans with a service-related disability who are unemployed for 6+ months.
Who are the target groups?
To get the credit, consider hiring individuals who fall into these categories:
- Veterans receiving government assistance or with service-connected disabilities.
- Long-term unemployed (for 27 weeks or longer and receiving unemployment benefits).
- Recipients of certain government programs such as Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), or Supplemental Security Income (SSI).
- Designated community residents aged 18-39 living in Empowerment Zones or Rural Renewal Counties.
- Vocational rehabilitation referrals in vocational rehabilitation programs.
- Ex-felons hired within a year after conviction or release from prison.
- Summer youth employees living in Empowerment Zones.
So, here’s what you need to do to get the Work Opportunity Tax Credit next year:
1. Find qualified applicants. Your State Workforce Agency (SWA) or local unemployment office can typically help with this.
2. Complete pre-screening requirements. Make sure to complete Form 8850 (which is the pre-screening request for the WOTC credit) and ETA 9061 within 28 days of their start date. (Or, if the applicant has a conditional certification, ETA Form 9062)
3. Track the employee’s hours and wages. To qualify for the WOTC, they must clock at least 120 hours in their first year of employment.
4. Do the math and claim the credit. Calculate the percentage of first-year wages you can claim with Form 5884, then transfer that amount to Form 3800, and attach both to your federal income tax return (hey, I never said the paperwork would be easy).
And of course, you’ll need to practice good recordkeeping habits throughout the process (to help keep potential audits at bay): Keep track of any and all submitted forms, employee certifications, and records of wages and hours worked.
Is the credit right for YOU?
But before making plans to take advantage of the WOTC, here are a few important questions to ask yourself:
What’s your current tax liability? The Work Opportunity Tax Credit is nonrefundable – so if the credit ends up being more than your income tax bill, you won’t see that money back (or you’ll need to rely on carrybacks or carryforwards to not lose it).
Do you have the bandwidth? The paperwork for the WOTC process is demanding (of course, my team and I are happy to help ease that burden for you).
Could other credits be more advantageous? Wages used to calculate the WOTC can’t be used for other tax credits (like the Employee Retention Credit or the Paid Family and Medical Leave Credit, for example), so this credit could actually hold you back from getting other (potentially better) benefits.
If you conclude the WOTC isn’t right for you, don’t fret – there are many other tax credits to consider for 2025 (which I’ll be clueing you in on in the coming weeks and months). You can also consider…
- The Small Business Tax Healthcare Credit: Providing health insurance to your employees = up to 50 percent of the premiums paid.
- Credit for Small Employer Pension Plan Startup Costs: Great for you as a business owner looking to inspire retirement savings habits.
- Research and Development (R&D) Tax Credit: If you’ve got a curious streak, use it to help offset your income tax liability.
- Inflation Reduction Act (IRA) Clean Energy Credits: Going green could be a tax-savvy move for you in 2025.
…and many others. Take these into account as you begin vision-casting for 2025: How can the credits the IRS offers align with your needs and passions as a business owner?
It can be hard to know for sure which tax credits are worth pursuing… and which ones might not be the right fit for YOUR business. That’s why I’m here. Let’s schedule a chat for some customized tax-credit direction:
calendly.com/ralfheyer/30-minute-meeting
To making real impact,
Ralf Heyer