The Work Opportunity Tax Credit (WOTC) is a federal program that rewards employers for hiring individuals from certain targeted groups who face barriers to employment. The credit ranges from $2,400 up to $9,600 per eligible employee, depending on the employee category, wages paid, and hours worked.

When systemized, WOTC becomes a repeatable part of your hiring process and can generate meaningful annual tax savings.

How WOTC Works

• The employee completes IRS Form 8850 during onboarding.
• Your HR or payroll team submits the form (and any required state form) to the state workforce agency within 28 days of the employee’s start date.
• If the employee is certified as eligible, you may claim a federal tax credit based on qualified wages paid during their first year of employment.

Eligible Employee Categories and Credit Amounts

1. Qualified IV-A Recipient (TANF)
   • Hired from families receiving Temporary Assistance for Needy Families.
   • Credit: Up to $2,400.
2. Qualified Veteran
   • Several veteran categories apply:
     • Unemployed at least 4 weeks but less than 6 months: Up to $2,400.
     • Unemployed at least 6 months: Up to $5,600.
     • Disabled veteran hired within 1 year of discharge: Up to $4,800.
     • Disabled veteran unemployed at least 6 months: Up to $9,600.
3. Ex-Felon
   • Hired within 1 year of conviction or release.
   • Credit: Up to $2,400.
4. Designated Community Resident (DCR)
   • 18–39 years old, living in Empowerment Zones, Enterprise Communities, or Renewal Communities.
   • Credit: Up to $2,400.
5. Vocational Rehabilitation Referral
   • Referred to employer by a rehab program, including veterans with service-related disabilities.
   • Credit: Up to $2,400.
6. Qualified Summer Youth Employee
   • Ages 16–17, hired for summer work only, living in Empowerment Zones.
   • Credit: Up to $1,200.
7. SNAP Recipient
   • Ages 18–39, member of a family receiving SNAP benefits.
   • Credit: Up to $2,400.
8. SSI Recipient
   • Receiving Supplemental Security Income benefits.
   • Credit: Up to $2,400.
9. Long-Term Family Assistance Recipient
   • Member of a family that has received TANF for at least 18 months.
   • Credit: Up to $9,000 over two years ($4,000 first year, $5,000 second year).
10. Long-Term Unemployed Recipient
    • Unemployed at least 27 consecutive weeks and receiving unemployment compensation.
    • Credit: Up to $2,400.
       

Why This Matters for Business Owners

1. Credits reduce your tax bill dollar-for-dollar if you has a pass through business.
2. WOTC creates a measurable return on your hiring practices.
3. Many qualifying hires happen naturally — but without a system, the credits are lost.
    

How to Systemize WOTC in Your Business - The Anomaly Checklist

1. Integrate into Hiring – Include Form 8850 in onboarding paperwork. This is 100% necessary and crucial
2. Automate – Use a real payroll system that integrates WOTC
3. Track – Maintain a dashboard of hires, certifications, and expected credits.
4. Maximize – Encourage retention so employees meet the 400-hour threshold.
5. Capture and File – Provide certifications and wage reports to us so we can claim the credit on your tax return.
6. Repeat – Treat WOTC as an ongoing hiring activity. No limits.
    

HR and Payroll Checklist for WOTC Compliance

• Provide Form 8850 to every new hire during onboarding. They are not legally required to complete.
• Collect completed Form 8850 on or before the employee’s first day. THIS IS CRUCIAL!

• Submit Form 8850 (and state forms) to the state workforce agency within 28 days of hire.
• Retain copies and submission confirmations.

• Maintain a log of new hires and their WOTC submission status.
• Monitor certifications received from the state.

• Track hours and wages for certified employees.
• Flag qualifying wages in payroll for accurate reporting.

• Forward certifications and wage data to Anomaly CPA at year-end.
• Confirm credits are claimed on your business tax return (we take care of this)