With the tight labor situation right now, many farmers are likely hiring certain employees that they may not have traditionally hired in the past (such as an ex-felon). Many of these employees may qualify the farmer for a fairly large tax credit called a Work Opportunity Tax Credit or WOTC. These credits range from a low of $1,200 per employee up to $9,600 per employee and remember that a credit offsets taxes dollar for dollar and it is a permanent savings. To receive the full credit the employee must remain your employee for an extended period (typically at least 400 hours during the first year). Simply hiring a qualified employee does not get you the full credit.
The types of employees that will qualify for the credit include the following:
- Temporary Assistance for Needy Families, or TANF, recipients.
- Supplemental Nutrition Assistance Program, or SNAP (also known as food stamps) recipients.
- Designated community residents living in certain economically struggling communities.
- Vocational rehabilitation referral individuals.
- Supplemental Security Income recipients.
- Summer youth employees who live in certain challenged communities.
These credits are good for 2018 and 2019 and may be extended by Congress. However, there is a fair amount of paperwork that must be filled out and filed timely with the state and the IRS as follows:
- Complete page 1 of IRS Form 8850 by the day the job offer is made.
- Complete page 2 of IRS Form 8850 after the individual is hired.
- Complete ETA Form 9061 or ETA Form 9062 if the employee has been conditionally certified as belonging to a WOTC target group.
- Submit the completed and signed IRS and ETA forms to your state workforce agency within 28 days of the employee’s start date.
- After an employee is deemed WOTC-eligible, the employer claims the tax credit by filing IRS Form 5884 with its annual tax return.
Certain qualified groups of employees will have paperwork to give to you are part of the hiring process.
Our firm has a department that can do all of this paperwork for you. I am fairly certain that most farmers do not want to take the time or effort to do this themselves. If that is something you are interested in, please send me an email and I will have the appropriate person contact you directly. Remember, the net benefit to you can easily exceed $10,000 with minimal effort on your part.