By: Scott Shannon, CEO TaxBreak
If I learned one thing over the past 20 years as a business owner, it is that no matter the size or focus of your business, it is critical to explore every possible means available to increase your profitability. Undoubtedly, the Work Opportunity Tax Credit (WOTC) is an extremely attractive program for helping companies find additional cash flow to offset the cost of employee expansion. It is a program that should be on every C level executives’ radar screen, especially for those that employ hourly wage workers or companies facing the challenge of high turnover rates.
In 1996, WOTC was established as a Federal tax credit program to help targeted workers shift from economic dependency to self-reliance while providing tax credits for the employer. It has defrayed payroll costs, given disadvantaged workers a chance to earn consistent income and become contributing taxpayers, and reduced the income tax liability to participating employers. And while many argue that WOTC was not developed to advance net job creation, we at TaxBreak know that it has done just that and then some. WOTC answers the call for a viable, alternative approach to encouraging private sector diversity while returning more than $1 billion in tax credits each year.
However, legislative authority dictates hiatus of several government programs from time-to-time to complete a system of checks and balances for full spectrum profitability. And unfortunately, WOTC is no exception or stranger to hiatus. But despite its present furlough since the start of 2015, WOTC has been historically renewed retroactively to the date of expiration. For example, the Tax Increase Prevention Act of 2014 was signed into law by the President on December 19, 2014, and reauthorized WOTC without changes, from December 31, 2013 from December 31, 2014. So while the current state of WOTC 2015 seems to be “on hold,” we recommend that your participation shouldn’t be. WOTC is just one of more than 50 business tax provisions commonly called “extenders” or “expiring provisions” because they are only temporarily executed and can only be carried on via Congress. And, it remains one of the most bi-partisanly supported and popular extenders in both Houses.
Ultimately WOTC permanency is the answer for companies to infuse their bottom line while helping our veterans, our homeless and others challenged with disabilities or ex-offenses and get them back to work. We need a plan for permanency now and it should start with the small, but groundbreaking steps to help convince Congress for good that WOTC should be paramount and no longer part of the “extender” tax code.
On June 17, 2015, two prominent members of the House Ways and Means Committee who have lead the crusade for permanent WOTC in the House have introduced such a bill. H.R. 2754, titled, “To amend the Internal Revenue Code of 1986 to make the work opportunity credit permanent” was introduced by Democratic Congressman Charles Rangel and Republican Congressman Tom Reed. They followed the bill with an endorsed letter crafted by Paul Suplizio, President of the WOTC Coalition, advocating “WOTC is an investment in productive lives and stronger future generations” and citing it “an exit from poverty.”
This bill marks the first step in the right direction and we need to effectively rally behind it. And we can do this in roughly three steps.
The first, and most important, is to work on getting our congressmen to co-sponsor H.R. 2754 and promote it via government circulation of Suplizio’s letter.
Next, with gaining WOTC support in the House, especially among valued members of his own party, obtain House Ways and Means Republican Chairman Paul Ryan’s endorsement.
Finally, treat WOTC like a constant until it becomes one. That is, we encourage companies to review for all categories on the IRS 8850, or the pre-screening request for the tax credit, and remit WOTC documentation in a timely manner. This of course also includes educating clients on how to maximize their eligibility determinations.
Some suggestions on how to efficiently determine eligibility include eSignature options in screening workflows during hiring and retro-screenings on paper and online methods. We also recommend mindful tracking and reporting of potentially eligible hires in the hiatus period to ensure proper credit identification and capture, and estimated tax payments and savings.
The start to the summer has brought encouragement: a significant piece of legislature with the potential to put WOTC on a permanent horizon. And with persistence, we can deliver. If we don’t find every penny and opportunity that is available for our clients, I fail; and I won’t let that happen.
With over 10+ million requests processed, 75,000 client locations and 16 years of experience, TaxBreak has become the employment based tax recovery expert in its field. Using proprietary technologies and a staff of tax credit recovery professionals, Taxbreak ensures its clients capitalize on every employment-based credit from a multitude of programs. It is the attention to details that sets us apart. We truly believe every penny counts.
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