Colorado Work Opportunity Tax Credit
Growing pains – all successful companies go through them at some point in the company’s development.
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It’s the time when a company has grown so quickly that people, programs and structures are insufficient to manage growth. While this can be a tough time it’s also a time of great opportunity. Central to this is the hiring of new employees to fill production shifts or for other company functions and needs. Many Colorado companies are surprised to learn about the Work Opportunity Tax Credit (WOTC). This credit awards companies that hire individuals from disadvantaged groups including veterans, Designated Community Residents and others who are challenged to find work. To help clients, prospects and others learn about the useful incentives, Hanson & Co has provided a brief summary below.
The tax incentive program is designed to reward companies that hire qualifying individuals from disadvantaged groups. Typically, companies receive a tax credit of $2,400 for each certified WOTC new hire. However, the general range of benefit ranges from $1,200 to $9,600 per qualified employee based on target group membership. It’s important to note that although the program is administered by the Colorado Department of Revenue, the tax incentive applies to federal income tax.
Qualifying Target Groups
Not all individuals from a target group qualify an employer for the tax benefit. They need to meet specific criteria which vary from group to group. Below is a summary of the key criteria for each group, including:
- Veterans – A new hire meets this criteria if they have are a member of family that has received SNAP benefits for at least 3 months out of 15 prior months to the hiring date, has been unemployed for at least 4 weeks in the year ending on the hiring date, and finally a disabled veteran who has been hired within one year of release from active duty or has been unemployed for 6 months in the year ending on the hiring date.
- Long Term Temporary Assistance for Needy Families program (TANF) – A new hire meets this criteria if they have received TANF benefits for at least 18 months ending on the hiring date, received TAN benefits for 18 consecutive or non-consecutive months, or has stopped being eligible for the benefits because they reached the maximum benefit level.
- Supplemental Nutrition Assistance Program (SNAP) Participants – A new hire qualified this for this group if they are between 18 and 30, and is a member of a family that received SNAP assistance for 6 months ending on the hiring date, or at least 3 of the 5 months ending on the hiring date.
- Designated Community Residents (DCR) – A new hire meets this criteria for this group id they are between 18 to 30 years old and reside within a federally designation Rural Renewal Community or Empowerment Zone.
- Ex-Felon – A new hire meets this criteria if the individual has been convicted of a felony and has a hiring dates of no more than 1 year after the conviction or release from detention.
- Youth Seeking Seasonal Work – A new hire meets this criteria of they are 16 or 17 years old, works for an employer from May 1st – September 15th and resides in a federally designated empowerment zone. The individual is 16 or 17 years old, resides in an Empowerment Zone or Rural Renewal County, and works for the employer between May 1 and Sept. 15.
The WOTC can result in significant tax savings if a qualifying individual is hired for a position. Hiring a qualifying individual can result in a significant tax savings. If your company has recently expanded or soon will be, Hanson & Co wants to help. For additional information on the WOTC and related benefits, call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.