Restaurants and hotels are essential components of the hospitality industry, and attracting and retaining a qualified workforce is crucial for their success. The Work Opportunity Tax Credit (WOTC) program provides a valuable opportunity for restaurants and hotels to not only bolster their workforce by hiring eligible individuals, but also allows businesses to claim tax credits that reduce their federal income tax liability. In this article, we explore how restaurants and hotels can take advantage of the WOTC and reap the rewards.

Identify eligible candidates

It is important to become familiar with the target groups eligible for WOTC such as veterans, long-term unemployed individuals, and recipients of government assistance programs, and integrate Form 8850 into your job application process. Your payroll processor may be able to easily incorporate this into your application and onboarding process. It is estimated that 15-20% of hospitality employees qualify as members of a target group, so an employer does not have to look far to find an eligible candidate.

Obtain certification

Submit Form 8850 and any other necessary documentation to your appropriate state workforce agency within 28 days of the candidates' start of employment. Your payroll processor may be able to handle this process as well.

Maintain documentation

Maintain proper documentation to support WOTC claims. Retain signed copies of Form 8850 and any other required forms to substantiate the eligibility of hired individuals from the target groups.

Calculate tax credits

Once the eligible employee works 120 hours, the employee’s wages become eligible for WOTC. The tax credit amount varies depending on the target group, the number of hours worked, and the wages paid to the eligible employee. The WOTC can range from $1,200 to $9,600 per qualified employee.

The WOTC program presents a valuable avenue for restaurants and hotels to enhance their workforce while enjoying associated tax benefits. By identifying eligible candidates, obtaining certification, maintaining proper documentation, and calculating tax credits accurately, restaurants and hotels can maximize their participation in WOTC. Taking advantage of this program not only reduces hiring costs but also promotes inclusivity, supports the community, and fosters a diverse workforce. By harnessing the benefits of WOTC, restaurants and hotels can thrive in an industry that relies heavily on exceptional hospitality and service.

If you have any questions about WOTC or other tax credits for your business, you can reach out to Bob Gilbert at rgilbert@citrincooperman.com, or a member of the Restaurants and Hospitality practice.