Hiring the right people is one of the biggest challenges business owners face. Between recruiting, training, and retaining top talent, costs add up quickly. But what if those same hires could actually save your business money?
That’s exactly what the Work Opportunity Tax Credit (WOTC) is designed to do. This federal program provides tax incentives to businesses that hire individuals from certain groups who often face barriers to employment. We recently sat down with Kyle Masengale of ASAP Payroll to talk through the details of WOTC, how it works, and why it’s a benefit every employer should consider.
What is WOTC?
The Work Opportunity Tax Credit is a federal tax incentive created to encourage businesses to expand hiring opportunities. Employers can earn a credit of up to $9,600 for each eligible new hire, depending on the employee’s background and hours worked.
This program doesn’t just help businesses — it helps communities, too, by promoting employment among groups that may otherwise struggle to find work. Think of it as a win-win: your company gains a new team member while potentially lowering its federal tax liability.
Who Benefits the Most?
While WOTC is available to employers across all industries, some sectors see more frequent benefits.
- Construction and skilled trades often qualify because of their constant hiring needs.
- Restaurants and hospitality businesses also benefit thanks to high turnover and seasonal hiring.
- Home health care and caregiving providers regularly qualify due to the diverse workforce they employ.
That said, every employer — whether you have five employees or 500 — can take advantage of WOTC. If you’re hiring, it’s worth running each new employee through the screening process.
Which Employees Qualify?
WOTC is tied to specific employee categories. Some of the most common include:
- Veterans transitioning back into the civilian workforce.
- SNAP (food assistance) recipients, who may face financial hardship.
- Ex-offenders, who often struggle to find employment opportunities.
- Residents of designated communities, such as empowerment zones or rural renewal counties.
Not every new hire will qualify, but enough often do that the savings add up quickly. Even if just a few of your employees are eligible, you could see thousands in credits each year.
How ASAP Payroll Makes It Easy
For many business owners, the biggest barrier to claiming tax credits is paperwork. Forms like IRS Form 8850 need to be completed within a short timeframe, and errors can mean losing the credit.
That’s where ASAP Payroll comes in. We integrate WOTC questions directly into the employee onboarding process. When a new hire fills out their forms, the information we collect is automatically checked against eligibility requirements. From there, we handle the submission to the government, ensuring your business doesn’t miss out.
This means you don’t have to worry about compliance details — you simply focus on hiring, and we take care of the credit capture.
Key Compliance Tips
One of the most important things to remember: WOTC isn’t retroactive. You can’t go back and claim credits for employees you’ve already hired. Employers must submit the required forms within 28 days of the new hire’s start date.
Another tip: part-time employees can qualify too. Once they’ve worked at least 120 hours, they may be eligible for credits. That makes it worthwhile to screen every single new hire, not just full-timers.
The Real Impact
The numbers speak for themselves. Some employers save $9,600 per qualifying employee, while others report receiving tens of thousands of dollars in total credits over time.
Those savings can be reinvested back into your business — whether it’s adding to your fleet of vehicles, upgrading equipment, improving facilities, or even hiring additional staff. For small businesses, that money can make a significant difference in both operations and growth.
Conclusion
The Work Opportunity Tax Credit is one of the most powerful — and underutilized — tools available to employers. It creates opportunities for individuals who need them most, while rewarding businesses that open their doors. For many small and mid-sized companies, it’s a simple way to improve cash flow and reinvest in growth.
Ready to learn more? Visit our [Work Opportunity Tax Credit Guide] to see how ASAP Payroll can help your business take advantage of every available credit.