A Guide to the WOTC for Healthcare Employers

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The work opportunity tax credit (WOTC) is especially valuable for healthcare providers interested in providing job opportunities to select groups. Learn more!

Healthcare employers can take advantage of different types of tax credits, depending on their circumstances. One of these incentives that can save businesses thousands of dollars is the Work Opportunity Tax Credit (WOTC) program. This federal tax credit program has been renewed and will continue to be available to companies until the end of 2025. It is valuable particularly to healthcare organizations that are open to hiring WOTC-eligible workers as it enables them to channel substantial savings into their businesses.

So, how does the Work Opportunity Tax Credit work for healthcare organizations? This article will explore what the WOTC program is and why it’s relevant for healthcare providers. We’ll also discuss the types of eligible employees, program benefits, and who should use this credit. Finally, we’ll discuss how recruiting and onboarding software can help you manage WOTC easily.

What is the Work Opportunity Tax Credit (WOTC)?

What is WOTC? The Work Opportunity Tax Credit (WOTC) is a general business credit designed to encourage businesses to hire specific groups of people who face significant obstacles to getting job offers. Employers get to lower their federal income tax liability by taking advantage of this tax credit, and WOTC-eligible workers can work towards becoming self-sufficient citizens with a steady source of income.

In healthcare, jobs like nursing, medical assistants, or senior care require a shorter duration to complete training or certification. The lower barrier to entry for such jobs is an opportunity for WOTC-eligible individuals who may be interested in healthcare jobs but have limited financial resources for advanced medical education.

When current job market conditions are tight, businesses that hire WOTC-eligible individuals may benefit in two ways. First, companies are hiring from a pool of candidates that are often overlooked or ignored. In doing so, they may find much-needed healthcare talent from many of those groups.

Second, hiring WOTC-eligible individuals helps the business save thousands in tax credits. These reasons are why the Work Opportunity Tax Credit was created – a win-win for employers and workers.

How Much is the WOTC Tax Credit Worth?

One of the more commonly asked or searched questions about WOTC tends to be: what is the federal work opportunity tax credit worth? The answer varies.

The tax credit you receive for each employee is calculated as a percentage of qualified wages paid during the first year of employment. You could claim a tax credit equal to 40% of a WOTC-eligible employee’s wages if they worked at least 400 hours in their first year of employment.

If they didn’t meet 400 hours but worked at least 120 hours in their first year of employment, then your business can still claim a tax credit of 25% of the employee’s wages. Since there is no limit to the number of WOTC-eligible employees, the credits can add up to sizable savings for your business.

To qualify for the federal work opportunity tax credit program, an employee must work a minimum of 120 hours in their first year of employment. You must wait until the employee accumulates 120 hours before filing for the WOTC. Without the minimum hours, you may not claim WOTC.

Furthermore, each eligible group of workers has a statutory maximum amount of qualified wages that are WOTC-eligible. The total credit per WOTC employee would be 40% of those statutory limits. Here’s a breakdown of the maximum credits available:

Credit Type
Credit Type
Receives SNAP (food stamps)
Veteran Eligibility Based on Disability (hired one year from leaving service)
Veteran Eligibility Based on Disability (unemployed at least six months)
Unemployed Veterans (at least four weeks)
Unemployed Veterans (at least six months)
All Other WOTC Target Groups

Here’s an example for a qualified veteran, one of the WOTC targeted groups of individuals.

You hire a disabled veteran who has been unemployed for six months in the one-year period ending on the hiring date. The employee performs at least 400 hours of service in their first year of employment, and the maximum eligible wages for such individuals is $24,000. Therefore, if you claim 40% of that amount, you will receive $9,600 in tax credits.

WOTC Categories

In most cases, the maximum wages that qualify for the work opportunity employer tax credit is $6,000, though a few specific groups have higher or lower maximum wages.

Groups that meet the WOTC credit eligibility requirements are as follows:

Gain Insight from Departing Employees

Departing employees can be an information goldmine for your organization. Whether they are leaving to pursue better opportunities or because of performance issues, scheduling an exit interview is crucial.

During the exit interview, an open and honest discussion can help you gather important information and valuable insights on the organization’s weak spots. The answers may even reveal workplace issues of which you are unaware. You can use the information they provide to improve the workplace for the remaining employees.

A WOTC-eligible TANF recipient is a member of a family receiving assistance under an IV-A program relating to Temporary Assistance for Needy Families for any 9 of the 18 months prior to the worker’s hire date.

These are veterans who served on active duty in the United States armed forces for a minimum of 180 days and have been discharged for at least 60 days. Additionally, they must meet at least one of the criteria below:

  • Has a service-connected disability that entitles him or her to compensation and who is within one year of discharge (maximum WOTC-eligible wages of $12,000).
  • Member of a family receiving Supplemental Nutrition Assistance Program (SNAP) assistance for at least 3 of the past 12 months
  • A veteran who was unemployed for at least six months during the prior year (maximum WOTC-eligible wages of $14,000).
  • A veteran who was unemployed for at least four weeks but less than six months during the prior year.
These individuals qualify if their hiring date is within one year of either their conviction or release from prison.
These are individuals between 18 and 39 who reside in an empowerment zone, enterprise community, or renewal community.
Individuals 18 to 39 years old on the date of hire who are members of a family that received SNAP benefits for the previous six months or at least three out of the last five months.
Individuals with a physical or mental disability who are receiving or have received services under a state vocational rehabilitation program, the Department of Veterans Affairs Vocational Rehabilitation and Employment Program, or an employment network through the Social Security Ticket to Work program.
These are individuals ages 16 or 17 on the date of hire who reside in an empowerment zone, enterprise community, or renewal community and are employed between May 1 and September 15 (maximum WOTC-eligible wages of $3,000).
These individuals have been unemployed for at least 27 consecutive weeks and received unemployment compensation under state or federal law at some point during this period.
These are individuals who are members of a family that has been receiving TANF benefits for the past 18 months or has exhausted TANF benefits in the past two years. Unlike other populations, an employer may claim the WOTC on behalf of a long-term family assistance recipient for two years. The maximum wages eligible for the WOTC for long-term family assistance recipients is $10,000 per year. During the second year of employment, the WOTC is equal to 50% of the eligible worker’s wages.
These are individuals who received SSI under Title XVI of the Social Security Act for any month ending within the 60-day period ending on the hiring date.

Who is Eligible for WOTC?

Employers of all sizes are eligible for WOTC, including taxable and tax-exempt. Eligible WOTC employers must be located in the United States and certain U.S. territories. According to the IRS, taxable employers claim the WOTC against income taxes. Eligible tax-exempt employers can claim WOTC only against payroll taxes and only for wages paid to members of the Qualified Veteran category.

To process WOTC-eligible employees, here’s the paperwork you may need :

  • A confirmation letter from your state workforce agency showing an employee is eligible for these benefits.
  • The completed pre-screening IRS Form 8850 from the eligible employee.
  • A completed DOL Form 9061 after the employee starts work.
  • DD214 if your new hire is a veteran and an additional VA letter if the veteran is disabled.

To claim WOTC for your business, you need:

  • IRS Form 5884 for partnerships, S corporations, cooperatives, estates, and trusts.
  • Or IRS Form 3800, the General Business Credit, for all other taxpayers and business owners.

It’s important to note that if you claim WOTC on employee wages, you cannot reuse them to claim other employee-based tax credits. They include Employer-Paid Family and Medical Leave Credits, Employee Retention Credit, forgivable Paycheck Protection Program loan proceeds, and other disaster retention credits.

Healthcare Employers That Can Benefit From the WOTC

Now that WOTC is explained let’s discuss how healthcare employers can benefit from this tax credit. Employment in the healthcare field is highly competitive, with many health facilities vying for the same prospects. Selecting from a pool that often gets overlooked may help to fill those positions more quickly. Since there is no limit on hiring WOTC-eligible individuals, the amount of tax credits accumulated can be pretty significant.

Lowering your corporate federal tax liability is another advantage of WOTC. By using it strategically, you may even be able to eliminate your tax liability for many years. Employers can apply for the credit even when there is no tax liability, as unused credits can be carried back one year and carried forward for up to 20 years. Hence, you can save your credits for when there is tax liability.

Reducing your business’ costs means larger profit margins and more money for expansion or new projects. Here are some types of healthcare facilities that benefit from WOTC:

Assisted Living Facilities

Staffing is a consistent challenge in assisted living facilities. Over three-quarters of assisted living operators surveyed by the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) said their overall staffing challenges have become “much worse” or “somewhat worse” during the pandemic.

The survey results included responses from 1200 nursing homes and assisted living facilities and noted a recent surge in the shortage of staff members. More than half the facilities are actively trying to fill vacant positions for certified nursing assistants (CNAs), licensed practical nurses, registered nurses, dietary staff, and housekeeping.

Nursing Homes

Nursing homes face similar staffing challenges as assisted living facilities. In the same survey conducted by the AHCA/NCAL, 94% of nursing homes said that they could not fill all shifts without agency or asking staff to work extra shifts.

Although the pandemic currently exacerbates this dire staffing situation, it highlights the urgency in addressing the shortfalls in the long-term care workforce. Hiring WOTC-eligible individuals is one way to help mitigate the shortage of long-term care workers and ensure that your facility provides adequate care to the senior population.

Rehabilitation Centers

Rehabilitation centers help patients with physical and mental issues due to various reasons such as disease or surgery. Therefore, it can be challenging to fill these positions and ensure that patients receive quality care. Services provided at a rehabilitation center may include:

  • Physical therapy
  • Occupational therapy
  • Nutritional guidance
  • Mental health counseling

With a wide range of services offered at rehabilitation centers, many of these positions can be filled by WOTC-eligible individuals once they’ve completed the necessary training and certification.

Home Health Care Agencies

According to the Bureau of Labor Statistics, home health care is one of the fastest-growing industries, with a projected growth of 34% from 2019 to 2029. With a large number of positions available in home health care, this is the right time for these agencies to apply for WOTC benefits.

Home health care agencies offer a range of senior medical services by trained professionals. Care is provided at the patient’s home, and the agency does not need to be located in the home city to provide care. Therefore, home health agencies can cast a broader net in the WOTC targeted groups pool to find quality candidates.

Hospice Care Facilities

Hospice care is given to terminally ill patients who have run out of options for treatment. Care focuses on the comfort and quality of life of an individual approaching the end of life. While this type of patient care is critical, hospices tend to have high turnover.

In fact, 35% of hospice leaders cite staffing shortages as a top concern for their organizations. Therefore, hospice care facilities can benefit from WOTC because of their higher demand for workers.

How APS Can Help You Navigate the WOTC Program

WOTC is readily available to qualifying healthcare facilities, yet many do not take advantage of it. Increased candidates and employees mean additional time and paperwork. Managing WOTC can seem overwhelming without a cloud-based solution in place to automate the process. The most effective way to manage this process is to utilize recruiting and onboarding software that integrates with a tax incentive solution.

APS’ employee recruitment and onboarding software for healthcare can automate your medical facility’s hiring process. Recruit candidates, track applicants, and onboard new employees, all in the same solution. During the onboarding process, use our ancillary service provided by Synergi to screen for WOTC-eligible employees automatically. Our software and services for healthcare facilities ensure that you:

  • Streamline your recruiting process
  • Hire the right people
  • Take advantage of maximum federal, state, and local hiring-related tax credits
  • Reduce your onboarding time

Contact us today to learn more about how APS can help your healthcare facility automate its payroll and HR processes.