Work Opportunity Tax Credit (WOTC): Eligibility, Proven Strategies, and Best Practices

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MP: Good afternoon, and thank you for joining us for an MP webinar covering work opportunity tax credit w OTC eligibility proven strategies and best practices.

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MP: i’m katie kreider marketing specialist here at MP For those of you joining us on a webinar for the first time MP, is a full service human capital management company.

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MP: We offer a complete suite of products and services to support organizations, through the entire employee lifecycle including HR recruiting payroll benefits administration.

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MP: Time and attendance and compliance assistance we support our clients with cutting edge technical solutions, as well as proactive reliable service and a deep HR and payroll expertise.

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MP: And NP we are wired for HR and help our clients succeed by aligning their people strategy with their business schools.

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MP: i’m excited to introduce your presenter for today’s program Paul curls Paul has over a decade of experience in the HR consulting space.

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MP: Working with businesses of all sizes and industries, Paul and his team have certified HR professionals at NP assist clients with.

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MP: clients with compliance training and full circle HR guidance and support, just a few housekeeping issues before we get started here today.

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MP: If you would like to submit a question during the program please use the Q amp a feature at the bottom of the screen, we will be sending out the recording of the webinar later today, along with the slides and with that i’m going to hand the MIC off to Paul.

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Paul Carelis: awesome Thank you katie nice to speak with you again looking forward to diving into today’s topic I think it’s going to be a good one.

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Paul Carelis: Not one that I believe we’ve covered in a webinar in the past.

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Paul Carelis: So with work opportunity tax credits will we’ll talk about the history, a little bit, but it’s something that’s that’s been around for for quite a while.

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Paul Carelis: has had a decent amount of traction but not a ton, but I think the hope and why we’re talking about it today is that now that so many companies have been able to take advantage of different programs.

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Paul Carelis: Like the employee retention tax credit PDP loans and all that to kind of get used to the process a little bit.

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Paul Carelis: This is kind of an evergreen or at least evergreen for the next few years program that hopefully now businesses are are used to going through the steps to to clean credits and will be another way to get some additional credits in the door.

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Paul Carelis: So first before we get started, just a quick legal disclaimer.

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Paul Carelis: This presentation is coming from an HR best practices standpoint, please don’t consume anything in today’s presentation as legal advice.

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Paul Carelis: So, in terms of what we will cover today we’ll go over a brief history of work opportunity tax credit, as well as the current state of the Program.

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Paul Carelis: will talk about the 10 eligibility categories that you may hire employees into that would result in a work opportunity tax credit for your organization.

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Paul Carelis: we’ll go into some level of detail in terms of how to take advantage of the Program.

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Paul Carelis: And throughout will will address some tips tricks and best practices and then we’ll also open it up for some question and answer so as katie mentioned, if you do have have questions feel free to use the Q amp a function here within zoom we’ll do our best to get to what we can today.

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Paul Carelis: In full honesty.

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Paul Carelis: i’m trying to.

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Paul Carelis: Re acclimate myself with w with what see with all the rtc and PPP we’ve done over the last two years it’s easy to get.

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Paul Carelis: get things confused and mixed up, but I think we have it all straight, but if there is a question.

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Paul Carelis: That we aren’t able to answer, along with the slides from today’s presentation that will go out to everybody, and this, this will especially be one that’ll be useful, because there are.

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Paul Carelis: We talked about the specific categories of eligibility, it can get a little wordy and a little detailed so we’ll make sure everyone gets a a copy of today’s slides and then whatever questions come in we’ll make sure that within a week or so we get all those answers out as well.

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Paul Carelis: Alright, so let’s dig in.

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Paul Carelis: So, in terms of some numbers.

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Paul Carelis: Was he was first created in 1996 it was part of a bill called the small business Protection Act.

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Paul Carelis: And it’s always had.

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Paul Carelis: An end date so there have been a few renewals of the wat si Program.

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Paul Carelis: Most recently, was in 2019 so it was set to expire in 2019 and at that time it was extended until 2025 so as of right now, as it stands, barring any further extensions of Watson it is currently authorized through December 31 2025 so it’s going to be around for at least a few more years.

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Paul Carelis: There are 10 specific categories of qualified groups who qualify for for what’s he not meaning.

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Paul Carelis: groups in in employer types, but rather employee profiles that would qualify for Watson it all depends on who the person is that you’re hiring and if they fall into one of the eligibility groups.

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Paul Carelis: In terms of fiscal year 2021 there were over 2 million certifications issued to employers, meaning that they sent in the required certification paperwork.

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Paul Carelis: That pertain to a new hire and they get those certified and approved as someone who will be eligible pending pending some you know, the amount of hours they work and the amount of wages, they earn so over 2 million, which is been a fairly.

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Paul Carelis: static number it dipped a little bit I think in 2019 or 2020 but it’s it’s hovered around that 2 million mark for for a while now.

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Paul Carelis: In terms of positions being filled the most common type of position being certified has been office administrative support positions but, that being said, if you look at the data, there are people in all different types of rules from blue collar to white collar to retail and hospitality.

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Paul Carelis: Science all of those things so there’s no there’s no one category of of employment that that’s necessarily better than others, looking at some kind of less official data.

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Paul Carelis: Some folks estimate, as many as 20% of new hires and it can obviously vary by industry, but up to 20% of new hires maybe what’s the eligible so definitely something worth looking into at the very least.

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Paul Carelis: Alright, so let’s let’s get into the minutia a little bit and those 10 categories of eligibility.

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Paul Carelis: Alright, so the first of which, and this is probably the most lengthy and word, he is a qualified veteran.

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Paul Carelis: So for a new hire to be considered eligible as a qualified veteran they’d have to meet one of these bullet points, not all of them just one.

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Paul Carelis: Either a member of a family receiving assistance under snap.

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Paul Carelis: abt slash food stamps whatever however you refer to it for at least three months during the first 15 months of employment.

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Paul Carelis: Annette or unemployed, for a period of at least four weeks doesn’t have to be a consecutive four weeks, but less than six months in the one year period prior to their higher date with you.

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Paul Carelis: Unemployed for at least six months.

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Paul Carelis: Also doesn’t have to be consecutive in the one year prior to hire could also be a disabled veteran who gets compensation because of that service related disability.

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Paul Carelis: When they’re hired not more than a year after being discharged from duty.

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Paul Carelis: And then, finally, a disabled veteran who is unemployed, for at least six months in the previous year before higher.

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Paul Carelis: So if you do hire veterans this, this would be the criteria for.

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Paul Carelis: For that eligibility category.

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Paul Carelis: The next the second category is an ex felon so for someone with a criminal record or a felony on their record to be eligible under what see, they would need to be hired by you, within one year of either being convicted or being released from prison because of that felony.

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Paul Carelis: Next, and this is the most recently added category to the list of eligibility qualified long term unemployment recipients.

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Paul Carelis: So to qualify under this category, the worker would need to be have been unemployed for at least 27 consecutive weeks at the time of hire.

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Paul Carelis: So over six months essentially and received unemployment during some at least some of that time period.

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Paul Carelis: So a lot of this obviously during the pandemic.

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Paul Carelis: Next is the designated Community resident, so this one’s a little bit up in the air right now.

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Paul Carelis: you’ve probably heard about empowerment zones and enterprise communities and things like that So those are actual geographic location where.

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Paul Carelis: We we’re hiring people that live within those spaces that they’re qualifying as a as a Watson candidate.

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Paul Carelis: The problem is, is that.

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Paul Carelis: When that was he came up for renewal in 2019, as I mentioned earlier.

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Paul Carelis: The empowerment zone definitions and guidelines also also expired, so I believe, and it may vary state by state some States may have this all squared away and others may still be determining it.

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Paul Carelis: But there is you’ll want to check wherever you’re hiring employees, especially if it was in if they live somewhere that was formerly empowerment zone, just to see if it is still classified as such, so there’s been a little shifting in this, but.

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Paul Carelis: For someone to qualify under this category, they need to be over 18 but under 40 and living within an empowerment zone enterprise Community a renewal community, and they need to continue living there.

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Paul Carelis: After they start employment with you, so you can’t go say travel out of state go recruit a bunch of people from an empowerment zone fire away and bring them over to your your business and have them live there, they have to remain residents of of that eligible area.

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Paul Carelis: Next category is vocational rehabilitation individual.

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Paul Carelis: So these are.

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Paul Carelis: folks with physical or mental disabilities and.

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Paul Carelis: referred through a specific program so a State plan approved by the rehabilitation act of 1973.

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Paul Carelis: An employment network plan under the ticket to work program or a program carried out by the Department of veteran affairs So these are people that would be coming to you from an agency in most cases, and would probably already come with.

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Paul Carelis: With wat si pre certification paperwork completed you just need to send it in here applicable State Agency.

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Paul Carelis: The next the summer youth employment, and I think this is a big opportunity, and when you look at the the data and the statistics, this is the least common use category for what’s the eligibility.

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Paul Carelis: And then that time of year is just about upon us in a couple months so good time to be talking about this and a good time to be keeping this front of mind.

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Paul Carelis: So for a employee to qualify as a summer youth employee, they need to be at least 16 but under 18, so it is a fairly limited window in terms of age eligibility.

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Paul Carelis: either on the date of hire or may first whichever is later.

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Paul Carelis: They can only be employed between may 1 and September 15 they cannot be employed prior they cannot be continued to be employed after September 15.

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Paul Carelis: And they also do need to live in an empowerment zone enterprise Community or renewal Community so somewhat understandable why why this is the least commonly used category, but.

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Paul Carelis: If there’s ever a time to start exploring it, and now is that time.

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Paul Carelis: Because this is when this is your window of eligibility here for the summer, youth and employees.

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Paul Carelis: Next category are snap recipients snap is the supplemental nutrition assistance Program.

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Paul Carelis: that’s the the federal term some states or or some communities referred to it as food stamps others refer to it as the gbt program all essentially the same.

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Paul Carelis: So if you hire someone who’s at least 18 but under 40 and a member of a family that receives snap benefits, either in the previous six months, or at least three of the previous five months.

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Paul Carelis: Then they would qualify under this category.

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Paul Carelis: Next is what’s known as a qualified for a recipient so.

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Paul Carelis: Title title for has to do with government assistant programs, so a qualified for a recipient would be a member of a family who’s receiving temporary assistance for needy families or.

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Paul Carelis: via the State where they reside.

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Paul Carelis: And they need to have be receiving those.

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Paul Carelis: federal assistance benefits for a nine month period sometime in the year and a half before they’re hired by you.

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Paul Carelis: There is also the long term, family long term family assistance recipient.

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Paul Carelis: So these folks have also received Assistant Under title for a.

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Paul Carelis: It for at least the last year and a half or 18 consecutive months or.

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Paul Carelis: 18 months.

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Paul Carelis: Since 97 and it has been more than two years since the end.

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Paul Carelis: of their first 18 month period or their you know their welfare benefits have run out.

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Paul Carelis: And it hasn’t been more than two years since those benefits ran out.

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Paul Carelis: Again, yes, I did see a question about the definitions.

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Paul Carelis: We will be again sending copies of the slides which will which go into detail about the those 10 factors and 10 possibilities for eligibility So yes, let’s.

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Paul Carelis: let’s talk about how to file next.

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Paul Carelis: Sorry, my audio went out for a second there So the first thing you need to do is have the worker complete what’s known as form 8850, so this is, this is the pre certification notice.

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Paul Carelis: timeliness is of the essence here.

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Paul Carelis: With with this, it is required that this.

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Paul Carelis: be submitted within 28 days of hire so important to note, you know, unfortunately, or unless it’s someone that you’ve just hired within the last month.

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Paul Carelis: This isn’t a program we’re going to be able to go back like say with the rtc or something and retroactively claim the credits for people that you hired you know, over the last couple years, this is really a moving forward type tax credit Program.

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Paul Carelis: So the employee would fill out at 850 that would signify that they may be a member of one of those 10 categories, we just reviewed.

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Paul Carelis: Their then would also need to be in most cases, a form 9061 so that goes in a little bit further detail the employee can fill that out or the employer can fill that out or a designate.

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Paul Carelis: Just basically goes into a little bit more detail about the qualification might be might have to do with dates of unemployment or dates of receiving assistance things like that, so the.

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Paul Carelis: asks a few more detailed questions so.

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Paul Carelis: You need to collect those the other, the other forms that are sometimes used if someone’s coming to you from an agency so it’s like a.

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Paul Carelis: State or federal workforce development program or the Department of veteran affairs and they kind of come with that at 850 and hand then you’d use form 9062 instead it’s a little bit different.

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Paul Carelis: And then, finally, if someone is qualifying due to being long under long term unemployment there’s a separate certification form that you use, so you always use the.

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Paul Carelis: And then one of those three other forms, depending on the situation in most cases it’s going to be 9061.

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Paul Carelis: So then, what you need to do is gather those two forms.

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Paul Carelis: and send those to the state, the State Agency that it pertains to so these do, even though the irs oversees the program and it’s a credit on federal.

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Paul Carelis: income taxes and federal employment and payroll taxes, it does all get handled at the State level, so the certification forms would go to your applicable State Agency.

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Paul Carelis: Next, you need to start measuring their employment.

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Paul Carelis: Their hours their pay and calculate accordingly.

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Paul Carelis: So that to qualify for any level of credit in most cases and employee needs to work at least 120 hours in their first year of employment with you to really maximize the credit, the they’re going to need to work 400 hours in that first year for people on tana that.

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Paul Carelis: title for a eligibility, they need to work, the full 400 hours anything less than that would not qualify those folks but most other categories do qualify if they work at least 120 hours.

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Paul Carelis: For most of the groups, the credit amounts to 40% of up to $6,000 in wages if they have surpassed the 400 hour mark, which means a credit of $2,400 per eligible employee.

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Paul Carelis: The credit percentage drops down to 25% for employees who work more than 120 hours but failed to hit that 400 hour mark.

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Paul Carelis: There is one category, in particular, that is more lucrative in terms of credit amount so some of those veteran groups, the qualified veterans and disabled veterans for certain categories of those depending on their eligibility.

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Paul Carelis: in special cases that $6,000 week base quadruples to a $24,000 wage base so.

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Paul Carelis: That is the highest category and the highest amount of credit, you can get through yc those can be as high as $9,600.

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Paul Carelis: For a specifically qualified veteran who is otherwise eligible.

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Paul Carelis: And then the third step is going to go on ahead and claiming that credit.

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Paul Carelis: So the way that the credit is claimed, is on a form.

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Paul Carelis: So that goes alongside with your your 3800 your your annual tax filings and it can offset your federal income taxes.

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Paul Carelis: question that comes up often is, you know how does this work for tax exempt organizations nonprofits.

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Paul Carelis: Their form is slightly different it’s a.

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Paul Carelis: See.

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Paul Carelis: And they are able to for a tax exempt organization.

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Paul Carelis: They are only allowed to use this for hiring qualified veterans and the credit would be against their employer social security tax.

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Paul Carelis: Whereas for profit businesses tax subject organizations.

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Paul Carelis: It goes against their income tax liabilities, excuse me on form 3800.

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Paul Carelis: As well as the employer social security tax.

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Paul Carelis: It is important to note that, unlike etc, where, if your credits amount to $2 million and your tax liabilities are only $1 million.

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Paul Carelis: It, this is not a refundable credit like that, so you won’t get a check in the mail for $2 million in that case you can get it for offsetting why you did have for tax liabilities it just cannot exceed that, but there are some some special rules that will get into now.

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Paul Carelis: So skipping ahead a tiny bit, if you look on the the very last bullet point.

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Paul Carelis: You are allowed to carry over unused what’s the credits, you can either take them back retroactively one year.

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Paul Carelis: Or you can carry them forward up to 20 years, so if you do look out and have a large yc credit that far exceed your actual tech eligible tax liabilities, you do have the ability to keep rolling out for it up to 20 years so.

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Paul Carelis: Please don’t hesitate to to explore the program you know if you don’t have a great deal of tax liabilities, because you can continue to roll it forward and forward and forward.

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Paul Carelis: In terms of best practices, the best ideas is to just start baking this into your onboarding process so.

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Paul Carelis: If you don’t have have that paperwork as part of your onboarding now, this is a great time to start doing it.

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Paul Carelis: And the more user friendly you can make it the better, so if you do use some sort of electronic onboarding we tend to see much higher success rates and engagement rates with employees.

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Paul Carelis: When they’re able to fill this in electronically.

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Paul Carelis: And then also you know aid to.

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Paul Carelis: Show show the talent pool what you’re doing, and also to help with your recruitment efforts definitely leverage your your efforts in this area, say, you know where.

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Paul Carelis: As part of what see where.

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Paul Carelis: You know, whatever groups, you wish to target, you know we encourage veterans to apply, we encourage.

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Paul Carelis: Long term on employee to apply, whatever it may be.

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Paul Carelis: If you tuned into our webinar a few weeks ago, you probably heard folks talking about some of the.

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Paul Carelis: More original and unique and open minded recruiting strategies that are out there now, including hiring people with criminal records.

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Paul Carelis: You know, having a more open recruiting and hiring strategy this plays perfectly into something like that so take advantage.

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Paul Carelis: Similarly, if you’re if you’re looking for for help and struggling your ads aren’t getting a lot of hits you’re not getting a lot of applicants and when you when you put something out there.

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Paul Carelis: have it, you know see seek out within your community, the American job centers the state workforce agencies, sometimes even cities will have an equivalent to that.

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Paul Carelis: They likely have a pretty healthy talent pool and a lot of times they’ll specialize and folks who may qualify under some of these programs so.

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Paul Carelis: At the very least, it doesn’t hurt to ask, and it could turn into a great.

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Paul Carelis: Recruitment funnel for you as a business.

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Paul Carelis: I said it before, but those state agencies aren’t joking when when we talk about the 28 day timeframe.

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Paul Carelis: I have had experience with employers who kind of just collected all the forms and didn’t send them in until after the fact, we later on and.

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Paul Carelis: It didn’t go well for them, so you do want to make sure that.

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Paul Carelis: You have this as a pretty well disciplined process as part of your overall onboarding that as you’re collecting this data you’re getting the forms completed and you’re sending those off and not waiting because.

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Paul Carelis: They do they do check the higher date and if it’s been more than 28 days they very well could and will probably reject the certification for that worker.

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Paul Carelis: Other best practices not listed here.

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Paul Carelis: certainly recommend keeping all of your paperwork straight.

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Paul Carelis: The irs is is staffing up with you, and once they get through their mountain of tax returns and amendments that they’re that they’re working on at the moment they they do keep saying that they’re hiring more and enforcement and inspection so.

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Paul Carelis: It just want to make sure that you’re keeping good records keeping all of your paperwork all your certification forums, all that.

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Paul Carelis: just keep them handy keep them safe keep them secure so that should you be reviewed or audited or anything like that you’ve got the paper trail to support your credits.

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Paul Carelis: For those of you who would be interested if you do use MP for for payroll and are on the isola platform and especially if you utilize our electronic onboarding feature.

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Paul Carelis: We do have a warranty service that we offer will send along some information included with our copies of the slides and the other content that we send send out later today, so that is a.

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Paul Carelis: benefit we provide where we help streamline many aspects of the waze process through our electronic onboarding platform and help out with the filings and all of that.

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Paul Carelis: So if you are interested, please let us know, be happy to talk about that further.

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Paul Carelis: looks like we do have a few questions.

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Paul Carelis: Alright, so a lot of this information is not part of the normal hiring process right yeah so most of these questions in most cases, you do not want to ask before you’ve made an offer to hire somebody so you don’t want to ask them about disabilities or.

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Paul Carelis: You know, economic economic type questions about whether or not they receive food stamps or federal assistance or anything like that great point.

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Paul Carelis: Is there a form after hiring we can get our employees to fill out to see if they qualify.

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Paul Carelis: So yes, there would be a form at 850 what we can do and i’ll work with katie in terms of the communication after today’s session is, we can include a copy of that at 50 So you can see what it looks like.

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Paul Carelis: It is technically a voluntary forum as he that’s another question that came in, so you don’t necessarily want to force employees to fill it out if they’re not comfortable.

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Paul Carelis: But you can you can utilize it, you can use it, you can ask the questions there’s a pretty lengthy equal employment opportunity Commission eeoc opinion letter about the validity and.

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Paul Carelis: Compliance piece of using form at 850 and asking those questions and they’re fairly adamant that it doesn’t violate the eeoc rules that does not violate the.

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Paul Carelis: Ada rules, you know, I will say the one caveat to, that is, if someone does say check off that they’re disabled veteran or you know, have a physical disability or a mental disability.

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Paul Carelis: You generally don’t want to press and pry further than that, at least at this juncture it’s okay to ask the questions on for the purposes of the form at 50.

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Paul Carelis: But again, you don’t you don’t want to cross the line in any way.

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Paul Carelis: Does the idiot 15 need to be completed before a job offer.

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Paul Carelis: And can it be sending complete electronically So yes, it can be done electronically that’s the way we do it as part of our service.

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Paul Carelis: We bake it into the onboarding documents, so, while they’re filling out their w four and their I nine and all that other new hire paperwork, they can fill out that at 850 as well.

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Paul Carelis: You can do it at the time of offer I wouldn’t generally recommend it unless it’s coming from an agency, obviously.

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Paul Carelis: I wouldn’t recommend doing it to you know prior to making a hiring decision on somebody again just because you don’t want it to seem that is clouding your judgment, one way or the other, or being used to prefer sensitive information and influencing your hiring decision in any way.

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Paul Carelis: Is there a website that lists the empowerment zone, yes, I believe, so I will.

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Paul Carelis: Make sure we send a link to that, if it is still currently, as I said, I know there’s been a lot of back and forth about certifying all the empowerment zone so to the extent that that’s completed will will send out a link for that.

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Paul Carelis: Will payroll records be sufficient records for reimbursement or does that information need to be loaded into government forms yeah generally the payroll records should be.

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Paul Carelis: The wage information should be sufficient, and it will correspond with tax forms you’re already submitting anyway.

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Paul Carelis: I will look into it says had a question here about for me the 50 and then the timing of it, I will take a look at that and see if changes have been made to the 50 since I last last reviewed, and I will I will include my opinion on that in our in our message out.

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Paul Carelis: alright.

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Paul Carelis: So I believe that’s Those are all the questions that we got today great ones, thank you very much, and I will get back to everyone, especially about the timing of the.

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Paul Carelis: But that concludes the the session for today sorry if it was briefer than you expected, it was a lot of information I didn’t want to overkill it too much, but I do thank you for joining us, I know hand things back over to katie.

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MP: Thank you, Paul lots of valuable information on the work opportunity tax credit any questions that were not able to be answered.

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MP: Again, will receive a response via email within five to seven business days the MP HR team is here to guide your organization on any HR compliance issues.

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MP: If you’d like to learn more about how we can assist your organization, please visit our website to set up a short 15 minute call.

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MP: Be sure to join us next week on the same day and time for our webinar on the great resignation key steps to reduce employer liability.

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MP: visit our website to register and to see the full calendar of upcoming events and available resources, we will be sending out a recording of today’s webinar with the presentation slides this afternoon, thank you for joining us and have a terrific day.