Tax Credit Trends and Overview: Turning HR Departments ...... · Tax Credit Trends and Overview:...
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Tax Credit Trends and Overview: Turning HR Departments Into A Profit Center
December 8, 2016
1. WOTC Program Overview and Trends
2. Why companies choose Walton
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Content
Work Opportunity Tax Credit (WOTC) Program Overview
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WOTC Program FAQ’s:
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What is WOTC?
WOTC is a federal hiring incentive program that promotes the hiring of members of select target groups who face barriers to employment. This is done by providing a tax credit to employers who hire and retain members of these target groups.
What are the WOTC target groups?
There are 10 target groups including TANFRecipients, select veterans, SSI recipients, and ex-felons to name a few.
What companies good prospects for WOTC?
For-profit companies with high turn over and entry-leveljobs are good candidates for the WOTC program.
Requirements for companies to claimWOTC:
1. Employees must have been screened for WOTCeligibility on or before day of job offer
2. Signed Form 8850 must be filed with stateworkforce agency (SWA) the 28th day ofemployment (e-signature is accepted)
3. Employer must receive a certification fromSWA confirming the employee is a member ofa target group
4. Employer must retain employee for a minimumof 120 hours within their first year ofemployment
Employers claim the realized WOTC annually at thetime they file their fiscal year tax return
How much is the tax credit?
The tax credit ranges between $1,200 and $9,600depending on the target group, retention andwages earned.
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WOTC Program Target Groups
Currently, there are ten (10) target groups within WOTC:
• Veterans
• TANF Recipients
• SNAP (Food Stamp) Recipients
• Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
• Vocational Rehabilitation Referral
• Ex-felons
• Supplemental Security Income Recipients
• Summer Youth Employee (living in Empowerment Zones)
• Long-Term Unemployed (Unemployed 27 weeks or longer and have filed for unemployment)
More employers are screening
through an ATS
Certifications less reliant on backup documentation
States are moving to online
processing
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Important Trends in WOTC Landscape
An estimated 75% of large companies use an ATS
Most ATS systems provide WOTC screening integrations
Seamless experience for job candidates and employers
Superior results through electronic signature and filing of Form 8850
Growth of ATS Screening
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Case study: First 11,000 certs in 2015
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Food stamps825375%
TANF107710%
DCR3954%
Veterans1491%
Other112610%
86%Only required e-
signed 8850
Food Stamps/SNAP and TANF (Long-Term Welfare) made up more than 85% of WOTC certs
Neither target group requires backup documentation
The next two most common target groups are designated community residents and veterans
The DD 214, or military discharge papers, can sometimes be obtained through online resources or through the states directly
Trend: WOTC certifications are becoming less reliant on backup documentation
Case study: First 11,000 certs in 2015 (continued)
89%Electronically
certified
In nearly 90% of the cases, WOTC screening data can be submitted electronically to the states for certification
This occurs either in bulk or on an individual basis
The only major state that current doesn’t allow electronic submission of data is New York
Trend: WOTC is moving toward electronic submission of data
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Walton’s Automation with Government Agencies
Automated
Pending
Automation
HI
AKFL
MI
ME
NY
PA
VAWV
OHINIL
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NCTN
AK
MO
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AL
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MN
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SNAP, TANF and DCR Categories Overview
Supplemental Nutrition Assistance Program (Food Stamp) Recipient and TANF Recipient
• Age 18 to 39 years old, AND• A member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for:
The 6 months ending on the hiring date, OR At least 3 of the 5 months ending on the hiring date Typically, by far, the most common WOTC target group 44MM-45MM people on SNAP in a given year; or 21MM families 14.6% of U.S. population was on SNAP in 2014 Southeastern States ranged from 16-22 percent; states like California and Texas also in double digits Nearly 1.5MM families on TANF in 2015
Designated Community Resident (DCR)
• Age 18 to 39 years old, AND• Resides within one of the federally designated: Rural Renewal Counties (RRCs), OR Empowerment Zones (EZs) Large number of zone areas in United States
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SNAP Category/Percent of Population Receiving Benefits
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WOTC: Minimum Retention Periods/Hours Worked
Claiming the WOTC – is subject to employers meeting the “Minimum Employment or Retention Period” as follows:
TIER 1: WOTC is equal to 25% of “qualified” 1st-yr. wages if the “new hire” works at
least 120 hours.
TIER 2: WOTC is equal to 40%, “qualified” 1st-yr. wages, if the
“new hire” works at least 400 hours or more.
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WOTC: Maximum Tax Credit Amounts By Category
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WOTC: Veteran Target Group
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Potential Tax Savings on WOTC
# Annual Hires Eligibility Rate Conversion Rate Avg. Cert Value Annual Tax Credits
300 15-20% 50% $1,000 $22,500-$30,000
500 15-20% 50% $1,000 $37,500-$50,000
1,000 15-20% 50% $1,000 $75,000-$100,000
5,000 15-20% 50% $1,000 $375,000-$500,000
1Assumption = 15-20% of your new hires are eligible for the tax credit
² Average value of a certification = $1,000. Companies hiring individuals from one of nine target groups receive $1,500 to $9,600 in tax credit savings per
qualified employee
Please note, the estimator above does not include an additional benefit if the tax credit certification obtained is also a Long-Term Family Assistance –LTFA
(formerly WTW) certification. LTFA certifications can more than double the value of your credit. The maximum value of each LTFA certification is $9,000.
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How Do Employers Apply For WOTC?
Employers must complete form for each new hire:
• IRS Form 8850: “Pre-Screening Notice and Certification Request”
• ETA Form 9061 – “Individual Characteristics Form”
• ETA Form 9062 – “Conditional Certification” (this Form may be used in lieu of ETA Form 9061 if the new hire was pre-certified)
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Forms Submission: IRS 8850 Form
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Forms Submission: ETA 9061
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How Do Employers Manage the WOTC Program?
Step One: Screen all candidates for the WOTC Program on or before the date of job offer
• Candidates may be screened at the application or new hire/onboarding stage
Step Two: Submit signed 8850 forms within 28 days of hire
• Signatures may be submitted in wet or electronic formats, including via facsimile
• All states now accept electronic signatures on the 8850
• Certain categories require backup documentation regardless of WOTC process
• For example, discharge papers, driver’s license
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How Do Employers Manage the WOTC Program?
Step Three: Monitor WOTC Program paperwork filing
• Respond to requests for additional information
• Contest denials
• Address terminated employees
• Post hire/pre certification handling
• Post certification
• Capture of any tax credit value and tracking – up to one year for most target groups, two years for long term assistance
Step Four: Calculate Tax Credit Value
• Track wages and hours
• Determine target group value
• Address terminated employees and employees who have maximized tax credit
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Forms Submission, Step 1: Screening
Screening may be electronic, telephone/IVR, or paper based methodologies
required to determine eligibility of candidates for the WOTC Program
• Screening must include completion of IRS Form 8850
Many companies use an integrated approach to screening combining multiple
vendors’ services with the tax credit screening
• For example, WMS has integrated solutions with vendors in ATS,
employee benefits, background, and I-9 screening service vendors
Companies may also complete the WOTC Program screening as a standalone
process
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Integrated ATS Solution: Candidate Flow
Candidate in applicant tracking or on-boarding system (ATS)
•Recruiter Module
•New Hire Module
Candidate Enters WMS Tax Credit Screening
•Enter as a applicant
•Enter as a new hire
Candidate Completes Tax Credit Screening Process
•Sent back to ATS
•ATS interface indicates whether candidate is potentially eligible for tax credits
•ATS interface to view backup documentation required and/or print forms if necessary
Candidate Completes ATS Process
•Client system sends data to WMS
•Cross comparison against incoming Candidates
•To update applicant stage candidates to new hire stage candidates
•To track candidates who never started or were terminated
•To track tax credit value
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Form Submission Step Two: State Agencies
41 states allow for electronic filing of documentation, including the 8850 and ETA 9061
• Electronic data integration (EDI) option available with certain states, requiring adherence to technical specifications
Filing methodologies, format, and back up documentation requirements vary by state
• Failure to comply with filing format specific to state WOTC coordinator requirements may result in a denial
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Form Submission Step Three: Certification and Credit Calculation
To maximize the opportunity for certifications, employers should
• Ensure all candidates are screened
• Ensure all candidates are screened timely
• Track all SWA submissions from submission to either denial or certification
• Review trends in denials and certifications
• Ensure any information or documentation that is still needed is obtained from employee and submitted
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Form Submission Step Four: Obtaining Certifications
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Form Submission Step Five: Addressing Denials
States may deny applicant WOTC Program certifications for a number of reasons:
• Individual did not meet the requirements of a target group
• Failure to provide proper documentation
• Late screening of new hire (post hire)
• Late submission of IRS Form 8850 for new hire
o Post 28 days unless retroactive opportunity exists
Why Work With Walton
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Why clients choose Walton
Key Differentiators
Superior results through innovative technology
Broad ecosystem of strategic partners
35+ years of tax credit experience
ASA Top 10 Emerging Technology Recipient
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Adding Value Through Our Integrated Partners
Integration with the nation’s largest military job board
The veteran target group is the most lucrative WOTC credit at $9,600 per individual
Access to more than 800,000 veterans
Strategic hiring of veterans as part of an initiative to increase WOTC credits
Integration with the best-in-class Electronic I-9 and E-Verify provider
WOTC screening and electronic I-9 processing out of the same platform for increased efficiency
Excellent way to maximize WOTC results
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Recap of Walton’s Technology
Smart phone and table screening
Mobile Doc Upload
SMS/Text Screening
Mobile Technology
Ease of access
Multi-level configurable permissions
Authentication
Customized data models
Credit Forecasting
Multi-dimensional Data Modeling
AlwaysON Reporting
Audit-ready
Data Agents
Smart phone document
upload
Next-Gen Reporting
Rest API
100% secure
Available 24/7
Cloud-based Technology
Brian DeVido
National Director, Business Development
☎ 732-660-4244
For More Information, Contact:
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