What Is the Work Opportunity Tax Credit (WOTC)? An Employer's Guide
WOTC rewards employers for hiring from targeted groups. Here is who qualifies, how much it is worth, and the deadline most companies miss.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit that rewards employers for hiring people from groups that have historically faced barriers to employment. For companies that hire at volume — restaurants, retail, hospitality, healthcare, staffing — it is one of the most valuable and most under-claimed credits available.
How much is WOTC worth?
The credit is generally calculated as a percentage of an eligible employee's first-year wages:
- 40% of up to $6,000 in wages for employees who work 400 or more hours in their first year — a credit of up to $2,400 per hire.
- 25% for employees who work between 120 and 399 hours.
- Certain groups carry higher wage caps. Some qualified veterans can generate a credit of up to $9,600, and long-term family assistance recipients can generate credits across two years.
Multiply that across hundreds of hires and WOTC quickly becomes a meaningful line on the tax return.
Who qualifies?
Employers of any size can claim WOTC. The employee must belong to at least one targeted group, including:
- Qualified veterans, including unemployed and disabled veterans
- Recipients of SNAP (food stamps) or TANF
- Long-term unemployment recipients
- Ex-felons hired within a year of conviction or release
- Vocational rehabilitation referrals
- Supplemental Security Income (SSI) recipients
- Designated community residents and summer youth employees living in Empowerment Zones
The deadline most employers miss
To claim the credit, the employer must submit IRS Form 8850 to the state workforce agency within 28 days of the employee's start date, along with ETA Form 9061 or 9062. Miss that window and the credit is gone — no matter how eligible the employee was.
This is where most companies lose money. Screening happens inconsistently, paperwork sits in a manager's inbox, and the 28-day clock runs out.
How to capture WOTC reliably
- Screen every applicant during the hiring or onboarding flow, not after the fact.
- Automate submission so forms reach the state agency well inside the deadline.
- Track certifications as states respond, and follow up on denials.
- Calculate credits from actual hours and wages at year end.
Congress has extended WOTC many times over the years, so confirm the current authorization and any recent changes with a specialist before planning around it.
Get a free assessment
Trak's screens applicants, handles state filings and tracks certifications so you capture every credit you are owed. to see what you may be leaving on the table.