New Jersey business owners can save on their taxes through programs and subsidies if they know where to look for them. Unfortunately, information for these programs isn’t always well known or publicized, so it requires research to discover what’s available.
NJ and the US have one major thing in common; state and federal tax codes are extraordinarily complex. Because of this, many business owners are simply happy to get their taxes filed and get back to the business of business as soon as possible.
With that in mind, I’ve been scouring the many state and federal programs on your behalf to find tax incentives and credits to put more money back in your business’ bank account.
The Work Opportunity Tax Credit is one of the ones that stood out as particularly advantageous.
What is the Work Opportunity Tax Credit?
The work opportunity tax credit (WOTC) is an amazing opportunity for employers to receive between $2,400 and $9,600 in tax credits for hiring employees with specific qualifications that have traditionally resulted in difficulty obtaining employment.
The idea of this program is to incentivize business owners to hire groups of people they might otherwise overlook for one reason or another. It’s an unfortunate reality, but it’s often that those who need jobs the most are also the first people that employers avoid hiring.
Fortunately, this program can deliver employment to people who need it the most, help employers deal with the staffing shortage we’ve seen in NJ, and offset the increased labor costs due to the recent increase to NJ’s minimum wage.
Whatever circumstances an individual finds themselves in, those circumstances rarely prevent a person from learning new skills and successfully performing a job.
These circumstances vary greatly, ranging from age (both too young and too old), lack of employment, lack of family support, poverty, or criminal history. The section on which categories of hires can be applied to the WOTC will explain this further.
Is the WOTC a State or Federal Program?
The WOTC is a federal program, although many aspects of it depend on New Jersey’s classifications of individuals and areas as meeting the necessary criteria for employers to utilize the tax credits offered by the WOTC.
I understand that’s a little confusing. Essentially, the program and its requirements are federal, but New Jersey agencies will determine whether a person or area meets those requirements.
Keep reading to learn the nine different groups of individuals for whom the WOTC applies.
What Categories of Workers Are Applicable to the WOTC?
The groups that qualify under the Work Opportunity Tax Credit are the following:
- Qualified IV-A recipient
- Qualified veteran
- Qualified ex-felon
- Designated community resident
- Vocational rehabilitation referral
- Recipient of SNAP benefits (food stamps)
- Supplemental Security Income (SSI) recipient
- Long-term family assistance recipient
- Qualified Long-term unemployment recipient
Please visit the IRS page on the WOTC program that details what all these terms mean, as groups like “IV-A recipient” aren’t immediately clear, and terms like “veteran” give an incomplete idea of who might qualify.
While I won’t try to cover every little detail of who does and doesn’t qualify, I can speak about these groups in general terms so you’ll have a rough idea of who’s included. Those from economically disadvantaged areas, military veterans and their families, those on public assistance and social security, as well as individuals who have experienced long-term unemployment.
Again, look at the IRS website for all the brass tacks, as there are specifications for each category that are very clearly laid out.
One thing I want to discuss specifically, however, are designated communities, as this topic has a broader benefit for business owners that goes beyond the WOTC.
What is a Designated Community?
A designated community is an area that has been deemed by state authorities as in need of economic assistance. The names of these areas vary from state to state, and in New Jersey, they’re referred to as Urban Enterprise Zones (UEZs) and Opportunity Zones (OZs).
Portions of Long Branch, Asbury Park, Lakewood, and Neptune (City and Township) are just a few of the locations in our area the state has designated as special zones. I’ve discussed the economic benefits to business owners of these state-designated areas before.
Even if the WOTC is not something that can benefit you, UEZs and OZs might, and it’s worth looking at our post on opportunity zones to learn more about these areas
For further information on these areas, you can check out the state’s website on opportunity zones and utilize an interactive map here that allows you to locate opportunity zones and a wealth of other knowledge about state infrastructure, projects in development, and demographic information.
How Do I Apply for WOTC Tax Credits?
The best place to start is by visiting the federal website for the WOTC. Once you’ve gotten the additional information you need, you can head over to the NJ State application for the WOTC and get registered to receive these credits.
If you’re interested in this program but simply feel that you don’t have the time to handle another tax form, just mention the WOTC to your accounting and payroll professionals, whoever they may be.
The WOTC is one of those programs that can seem too good to be true, but it isn’t. It’s a great opportunity for business owners to get the workers they need, help those in their community that need work, and save money on their taxes while doing so. It’s a win-win-win.