Work Opportunities Tax Credit (WOTC) & the Federal Bonding Program a self-directed study Craig Respess, M.S. (updated November, 2009)
WOTC Work Opportunities Tax Credit What it is, What it isn’t & How to Make It Work for Your Business Partners Craig Respess Updated 2009 Business Services Director
What it is….Some years ago, federal legislation allowed for Targeted Jobs Tax Credit (TJTC) which provided for possible tax credits for employers hiring people with disabilities. Unfortunately, TJTC authorization was time-limited, at times not re-authorized or in other situations was allowed to lapse. In 1996, Work Opportunities Tax Credit (WOTC), authorized by the Small Business Job Protection Act of 1996, replaced TJTC.
What it is….There was no tax credit legislation in 2006, however the reauthorization of WOTC in the “Tax Relief and Health Care Act of 2006,” (signed in December 2006) made WOTC retroactive to January 1, 2006, and continued authorization until December 31, 2007.
2008 In May, 2007, Congress passed the Small Business and Work Opportunity Tax Act of 2007, extending the WOTC program through August 31, 2011.
WOTC provides tax credit for employers hiring individuals from certain targeted groups: • low income individuals • former AFDC recipients (TANF) • some veterans • ex-felons • food stamp recipients • summer youth employees
Supplemental Security Income recipients (SSI) • VOCATIONAL REHABILITATION REFERRALS
Dollar$ and $en$e • For VR covered new hires, employers may take up to 40% of the first $6,000 in first-year wages (12 months) per qualified employee ($2,400) for employees who work at least 400 hours during the tax year. • Employers can claim a partial credit of 25% of wages paid for qualified employees who work at least 120 hours but less than 400 hours during a one-year period
What it isn’t …. While WOTC is often viewed as an incentive to encourage employers to hire people with disabilities ….
Schmidt-Davis & Hayward, RSA Longitudinal Study, RTI International, 2003
Accordingly, WOTC should not be viewed as a primary marketing tool in employer development, job development and consumer placement, but $2,400 worth of “icing on the cake” for employer partners.
How to Make it Work for Our Employer Partners First, the Official Process: 1.Employer determines likely eligibility by including the WOTC Pre-Screening Notice as part of the application process 2. On or before the day employment if offered, the Notice must be signed by the employer and employee. The Notice is mailed to the State Employment Security Agency (SESA) within 28-days after work begins 3. Based on information from the employee, the employer documents eligibility and submits documentation to the SESA 4. The SESA certifies that the individual is eligible for the WOTC and notifies the employer in writing for purposes of filing the tax credit VR and a Better Way
How to Make it Work (cont.) a better way…Skip the first 3 steps! While the SESA is the certifying authority for the tax credit, VR (and only VR) can “conditionally certify” any individual it refers for employment. This conditional certification will guarantee certification by the SESA as long as the appropriate documentation is dated on the first working day and the documents are mailed within the 28 days (up from 21 days prior to 2007).
VR Staff The appropriate staff member can complete the Conditional Certification (ETA 9062) and the top portion of the Pre-screening Notice (IRS-8850) in advance. The staff member can provide these to the employer or give them to the consumer if the consumer is conducting his or her own job search or interviewing process. The employer must have these at the hire date. These need to be original copies The Employer The employer only has to finish the IRS 8850 and send it, with the provided ETA 9062, to the Employment Security Commission within 28 days of hire. A little easier for the employer !
Where to get the Forms LOCATIONS OF DOCUMENTS AND FORMS (November, 2009) All links are also available on the DSB website ETA-9062 http://www.uses.doleta.gov/pdf/Appendix_II/Appendix_II__2_ETA_9062.pdf ETA-9061 http://www.uses.doleta.gov/pdf/Appendix_II/Appendix_II__1_ETA_9061.pdf IRS 8850 http://www.irs.gov/pub/irs-pdf/f8850.pdf
All Forms are to be forwarded to the State WOTC Coordinator. In North Carolina, that is: Ms. Virginia Terrell, Employment Security CommissionPOB 27625Raleigh, NC 27611(919) 733-4896(919) 733-3010 (fax)
Other Business Tax Credits Small Business Tax Credits IRS Code, Section 190, “Expenditures to Remove Architectural Barriers and Transportation Barriers to the Handicapped and Elderly,” enables small businesses to take an annual tax credit for accessibility accommodations.
IRS Code Section 190 What is a small business? In the year for which the tax credit is claimed, the business earned $1 million or less in gross receipts or had 30 or fewer full-time employees. What expenses are covered? Sign language interpreters or readers for employees or customers with hearing or visual impairments, purchase of adaptive/modification equipment, publishing costs of materials in alternative formats, removal of architectural barriers, or other supports services (employer paid job coach or use of a coworker to provide support to employee with disability)
IRS Code, Section 190 Dollars & $en$e Business can claim credit for 50% of expenditures over $250, not to exceed $10,250 on IRS Form 8826. The tax credit does not apply to new construction costs or building modifications being if the building was placed into service after November 6, 1990.
Architectural & Transportation Tax Deduction • IRS Code, Section 44, “Expenditures to Provide Access to Disabled Individuals,” (Disabled Access Tax Credit), provides for tax deductions for accessibility related costs regardless of the size of thebusiness. Some covered expenditures include: • providing accessible parking places, ramps, curb cuts • making telephones, water fountains restrooms accessible • making walkways at least 24 inches wide • providing accessible entrances to buildings
IRS CODE, SECTION 44 Dollars & $en$e The IRS allows a deduction of up to $15,000 per year for architectural and transportation barrier removal expenses. Deductions cannot be used for new construction, completion of renovations being made to a facility or public transportation vehicle or for normal replacement of depreciable property Business cannot take a deduction (under code 44) and a credit (under code 190) for the same expenditure)
Craig H. Respess, M.S. Employment Services Director NC Division of Services for the Blind 309 Ashe Avenue 2601 Mail Service Center Raleigh, North Carolina 27699-2601 (919) 733-9822 email@example.com
What Is Fidelity Bonding? • Insurance to protect employer against employee dishonesty • Covers any type of stealing: theft, forgery, larceny, and embezzlement • In effect, a guarantee of worker job honesty • An incentive to the employer to hire an at-risk job applicant • A unique tool for marketing applicants to employers • DOES NOT cover ‘liability” due to poor workmanship, job injuries, work accidents, etc. • Is NOT a bail bond or court bond needed in adjudication • Is NOT a bond needed for self-employment (contract bond, license bond or performance bond)
Highlights of the Federal Bonding Program • Fidelity bonding Services Are User-Friendly • NO bond approval processing–local staff instantly issue bonds to employers • NO papers for employer to sign to obtain free bond incentive for job hire • NO follow-up and NO termination actions required for bond issued • NO deductible in bond insurance amount if employee dishonesty occurs • NO age requirements for bondee other than legal working age in State • NO other U.S. program provides Fidelity Bonding services • NO Federal regulations covering bonds issued • ANY job at ANY employer in ANY State can be covered by the bond
Why Is Fidelity Bonding Needed for Job Placement? • Employers view ex-offenders and other at-risk job seekers as potentially untrustworthy workers, thereby, denying them job-hire • Insurance companies will not cover risky job applicants under commercial Fidelity Bonds purchased by employers to protect themselves against employee dishonesty • Anyone who has ever “committed a fraudulent or dishonest act” is deemed NOT BONDABLE by insurance companies, a situation leading to routine denial of employment opportunities for such persons • Being NOT BONDABLE is a significant barrier to employment possessed by the hardest-to-place job applicants; this barrier can be eliminated only by The Federal Bonding Program • Job bonding enables the employer to “obtain worker skills without taking risk” • Persons who are NOT BONDABLE can ultimately become commercially BONDABLE by demonstrating job honesty during the 6 months of bond coverage under the Federal Bonding Program (such commercial bonding will be made available by the Travelers Casualty and Surety Company of America; referred to hereafter as TRAVELERS
Who Is Eligible for Bonding Services? • Any at-risk job applicant is eligible for bonding services, including: ex-offenders, recovering substance abusers (alcohol or drugs), welfare recipients and other persons having poor financial credit, economically disadvantaged youth and adults who lack a work history, individuals dishonorably discharged from the military, and others • Anyone who cannot secure employment without bonding • All persons bonded must meet the legal working age set by the State in which the job exists • Self-employed persons are NOT ELIGIBLE for bonding services (bondee must be an employee who earns wages with Federal taxes automatically deducted from paycheck) • Bonds can be issued to cover already employed workers who need bonding in order to (a) prevent being laid off, or (b) secure a transfer or promotion to a new job at the company • Bonding coverage can apply to any job at any employer in any State
How Can Bonds Be Accessed Under the Federal Bonding Program? • Any organization is now eligible to deliver bonding services under The Federal Bonding Program; for many years bonding services were almost exclusively delivered by the State Employment Service • All organizations issuing Fidelity Bonds must be “certified” to do so by The Federal Bonding Program • The Fidelity Bonds issued to employers covering at-risk applicants are made available exclusively to The Federal Bonding Program by Travelers which is not duplicated by any other U.S. program • Bonds are issued instantly to be in effect the day that the applicant is scheduled to start work; the bonds are self-terminating (no termination paperwork needed), and the employer does not sign any papers in order to receive the bond free-of-charge • The bond insurance issued ranges from $5,000 to $25,000 coverage for a 6-month period with no deductible amount (employer gets 100% insurance coverage); when this bond coverage expires, continued bond coverage can be purchased from TRAVELERS by the employer if the worker demonstrated job honesty under coverage provided by The Federal Bonding Program • Bond can be issued to the employer as soon as the applicant has a job offer with a date scheduled to start work
Note: The DSB cannot issue the bonds to employers. Bonds should be issued by local job link centers and in some areas, the Employment Security Commission. The certification form completed by the bond representative and sent to the insurer can be viewed at http://www.bonds4jobs.com/forms.html
For business partners requesting additional information about the Program, a detailed brochure with detailed explanation of the Federal Bonding program can be accessed at http://www.bonds4jobs.com/assets/brochure.pdf
For VR Staff or Individuals seeking bonding services and a job, call toll free 1-877-US2-JOBS for the nearest location of the workforce office/one-stop center. Any agency/organization wishing to learn about acquiring bonds to be issued to employers to facilitate job placements: Call toll free 1-800-233-2258 ex. 246 or visit The Federal Bonding Program web site www.bonds4jobs.com
State Coordinator for the Federal Bonding Program Mr. James Korth Bonding Services Coordinator or Ms. Diane SmithNC Employment Security CommissionP.O. Box 27625Raleigh, NC 27611919-733-4896919-733-3010 fax