DIY tax credits could be costing your staffing agency thousands of dollars. Trying to manage tax credits in-house comes with hidden risks, from missing eligibility to noncompliant filings.
Most staffing agencies lack the time and systems in place to accurately claim credits. Expert help can reduce risk and burden and increase ROI.
Work Opportunity Tax Credit
Most staffing agencies qualify for the Work Opportunity Tax Credit (WOTC), a federal tax credit created to encourage businesses to hire individuals from targeted groups that face barriers to employment. Reducing hiring, onboarding, and training costs helps save companies money and diversify the workforce.
The WOTC program includes historically marginalized groups who face barriers to employment:
- Temporary Assistance for Needy Families (TANF) recipients
- Veterans
- Supplemental Nutrition Assistance Program (SNAP) benefit recipients
- Ex-felons
- Vocational Rehabilitation referrals
- Designated Community Residents (DCRs)
- Summer youth employees
- Supplemental Security Income (SSI) recipients
- Long-term unemployment recipients
Staffing agencies that claim WOTC incentives can save $2,400 to $9,600 per eligible new hire. However, many agencies miss out on these tax credits because of mistakes in the screening and application process.
Common Work Opportunity Tax Credit Mistakes
Many staffing agencies miss out on significant savings because of these WOTC mistakes:
- Overlooking eligible employees: Human resources teams unfamiliar with the WOTC criteria might miss eligible new hires.
- Missing deadlines: Form 8850 Pre-Screening Notice and Certification Request for the Work Opportunity Credit must be submitted to the IRS within 28 days of a qualified new hire’s start date. Failure to track deadlines can lead to delays and missed opportunities.
- Incomplete or inaccurate information: Errors in Form 8850 or Form 9061 Work Opportunity Tax Credit Individual Characteristics Form can delay or disqualify a company from receiving the tax credit.
- Lack of follow-up on certification denials: Not challenging or appealing certification denials can leave unclaimed tax credits.
- Improper recordkeeping: Incomplete or lost records proving employee eligibility can become an issue during an audit.
- Noncompliance with guidelines: Failure to comply with federal regulations can result in penalties or WOTC disqualification.
Consult with Tax Credit Experts
An experienced tax credit processing firm can ensure your staffing agency takes advantage of all eligible tax incentives. Lowering your agency’s federal tax liability can reduce your agency’s tax bracket for greater revenue and a stronger bottom line.
Reach out to MJA & Associates today to avoid potentially costing your staffing agency thousands in missed tax credits.
