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The President signed a law on December 18, 2015 to retroactively reauthorize the tax incentive for employers from January 1, 2015, and extend it through December 31, 2019. This is the first time in several years that the WOTC program has been re-authorized for more than one year. Employers claim about $1 billion in tax credits each year under the program.
WOTC is a tax incentive program designed to encourage employers to hire and retain individuals from specific target groups with employment barriers. These groups include Veterans of War (VOW), Empowerment Zone residents, welfare and food stamp recipients, Vocational Rehabilitation Referrals, and others. New to WOTC is the “long-term unemployed” category. Long-term unemployed recipients are defined as individuals who are unemployed for not less than 27 consecutive weeks and received unemployment compensation for a period of time under state or federal law. This new category is effective for employees who start work after December 31, 2015.
Many employers are unaware that they have the opportunity to qualify for a credit that can be up to $9,600 per eligible employee throughout the first year of employment through the WOTC program. And, now with the addition of the long-term unemployed category, there is even more potential for employers to receive tax credits.
Department of Labor and Workforce Development Can Now Approve Tax Credits in 24 Hour
The Tennessee Department of Labor and Workforce Development (TDLWD) announced Tuesday the introduction of a new online system where businesses can apply for Work Opportunity Tax Credits and be approved in most cases in 24 hours. Previously, the approval process for these types of tax credits took up to one year./p
A Work Opportunity Tax Credit (WOTC) provides business credits of anywhere from $1,500-$9,600 for hiring an individual from a qualifying target group. The Department’s WOTC unit issues about 700 tax credits weekly, providing an estimated $1.2 million in tax credits each week to Tennessee employers.
In 2014, Tennessee approved $54 million in Work Opportunity Tax Credits for employers across the state.
The new system dramatically increases the speed in which the Department approves these tax credits.
“In the past, with the combination of long time periods lacking Congressional authorization of the tax credits and a manual review process, the approval time for a tax credit ranged from six months, to a year,” the unit’s director, Nicholas Bishop said.
The TDLWD system is now connected with interfaces from other agencies and databases, allowing for a 24-hour decision on WOTC applications.
Employers can now manage all their records and applications online, letting them track the status of their application in real-time, with instant updates and communications.
It is estimated only about 25 percent of Tennessee’s employers currently utilize the WOTC. Department leaders are hopeful the introduction of the new online application system will allow more businesses to take advantage of the tax credits.
“States now have the ability to approve these tax credits through 2019 without any additional Congressional authorization. Employers have until June 30, 2016 to submit a WOTC application for all qualifying new hires made from January 1, 2015 through May 29, 2016,” Bishop said.
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