Staffing Series Week 4: What Staffing Agency Owners Should Know About the Work Opportunity Tax Credit (WOTC)

A Tax Credit Many Staffing Agencies Miss

The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire individuals from certain targeted groups that face barriers to employment. Eligible groups can include qualified veterans, individuals receiving certain government benefits, formerly incarcerated individuals, and others identified by law.

Why Staffing Agencies Should Pay Attention

Because staffing agencies are constantly recruiting and hiring, they often have more opportunities than most businesses to identify WOTC-eligible employees, if they're set up to catch them. That's the catch: eligibility has to be evaluated at the point of hire. To claim the credit, employers must obtain certification that the employee belongs to an eligible group, which requires submitting Form 8850 to the appropriate state workforce agency within 28 days after the employee begins work. Miss that window, and the credit is generally unavailable no matter how clearly the employee qualifies.

Practical Steps

• Incorporate WOTC screening into onboarding, not as a follow-up step.
• Train recruiters and HR personnel to recognize eligibility indicators early.
• Track certification deadlines carefully; the 28-day window doesn't extend.
• Work with your tax advisor to ensure proper documentation and credit calculation.

Bottom Line

The WOTC can provide meaningful tax savings while helping expand employment opportunities for individuals facing barriers to work. For an agency hiring at volume, a screening process that catches even a portion of eligible new hires can add up to real savings over a year.