WOTC: The complete employer's handbook.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit paid to employers who hire from groups that face barriers to employment. It's one of the largest, most underused credits in the U.S. tax code — and it's earned on hires you're already making.
What is the WOTC?
WOTC is a federal tax credit administered by the IRS and the U.S. Department of Labor. It rewards employers for hiring individuals from designated target groups — typically between $2,400 and $9,600 per qualifying hire, depending on the group, hours worked, and first-year wages.
The credit is claimed against the employer's federal income tax liability. Tax-exempt organizations can claim it against payroll taxes for veteran hires.
Who qualifies (target groups)
- Qualified veterans (including unemployed and disabled veterans)
- Long-term Temporary Assistance for Needy Families (TANF) recipients
- SNAP (food stamp) recipients
- Designated community residents in Empowerment Zones
- Vocational rehabilitation referrals
- Ex-felons hired within one year of conviction or release
- Supplemental Security Income (SSI) recipients
- Summer youth employees living in Empowerment Zones
- Long-term unemployment recipients
How much is the credit worth?
The credit is calculated as a percentage of qualified first-year wages:
- 25% of qualified wages for employees who work at least 120 hours.
- 40% of qualified wages for employees who work at least 400 hours.
- Maximum credit ranges from $2,400 for most groups up to $9,600 for certain disabled veterans.
How to file for WOTC
WOTC filing has strict deadlines. Miss them and the credit is lost — even if the hire would have qualified.
- Pre-screen on or before the job offer. The applicant completes IRS Form 8850, Page 1 before or on the day of the job offer.
- Complete Form 8850, Page 2 after hire and gather supporting documentation (ETA Form 9061 or 9062).
- Submit to your State Workforce Agency (SWA) within 28 days of the employee's start date. Late submissions are denied.
- Certification. The SWA reviews and issues a certification confirming the employee qualifies.
- Claim the credit on IRS Form 5884 with your federal income tax return (or Form 5884-C for tax-exempt organizations claiming for veterans).
The most common ways employers lose the credit
- Screening after the job offer instead of on or before it.
- Missing the 28-day SWA submission window.
- Incomplete Form 8850 or missing supporting ETA forms.
- Assuming a CPA is screening every new hire — most aren't.
How Finrock handles WOTC end-to-end
Finrock runs the screening, gathers supporting documentation, files with the State Workforce Agency inside the 28-day window, and tracks each certification through to the credit on your return. You get a guaranteed dollar figure — not an estimate — and your team spends no time on the paperwork.
Find out what you're owed.
We'll look at your hiring and tell you the real dollar figure — no obligation.