Tax Credit Trends and Overview: Turning HR Departments ...... · Tax Credit Trends and Overview: Turning HR Departments Into A Profit Center December 8, 2016

Tax Credit Trends and Overview: Turning HR Departments Into A Profit Center

December 8, 2016

1. WOTC Program Overview and Trends

2. Why companies choose Walton

© 2016 Copyright, Walton Management Services, Inc. 2

Content

Work Opportunity Tax Credit (WOTC) Program Overview

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WOTC Program FAQ’s:


What is WOTC?

WOTC is a federal hiring incentive program that promotes the hiring of members of select target groups who face barriers to employment. This is done by providing a tax credit to employers who hire and retain members of these target groups.

What are the WOTC target groups?

There are 10 target groups including TANFRecipients, select veterans, SSI recipients, and ex-felons to name a few.

What companies good prospects for WOTC?

For-profit companies with high turn over and entry-leveljobs are good candidates for the WOTC program.

Requirements for companies to claimWOTC:

1. Employees must have been screened for WOTCeligibility on or before day of job offer

2. Signed Form 8850 must be filed with stateworkforce agency (SWA) the 28th day ofemployment (e-signature is accepted)

3. Employer must receive a certification fromSWA confirming the employee is a member ofa target group

4. Employer must retain employee for a minimumof 120 hours within their first year ofemployment

Employers claim the realized WOTC annually at thetime they file their fiscal year tax return

How much is the tax credit?

The tax credit ranges between $1,200 and $9,600depending on the target group, retention andwages earned.


WOTC Program Target Groups

Currently, there are ten (10) target groups within WOTC:

• Veterans

• TANF Recipients

• SNAP (Food Stamp) Recipients

• Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)

• Vocational Rehabilitation Referral

• Ex-felons

• Supplemental Security Income Recipients

• Summer Youth Employee (living in Empowerment Zones)

• Long-Term Unemployed (Unemployed 27 weeks or longer and have filed for unemployment)

More employers are screening

through an ATS

Certifications less reliant on backup documentation

States are moving to online

processing


Important Trends in WOTC Landscape

An estimated 75% of large companies use an ATS

Most ATS systems provide WOTC screening integrations

Seamless experience for job candidates and employers

Superior results through electronic signature and filing of Form 8850

Growth of ATS Screening


Case study: First 11,000 certs in 2015

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Food stamps825375%

TANF107710%

DCR3954%

Veterans1491%

Other112610%

86%Only required e-

signed 8850

Food Stamps/SNAP and TANF (Long-Term Welfare) made up more than 85% of WOTC certs

Neither target group requires backup documentation

The next two most common target groups are designated community residents and veterans

The DD 214, or military discharge papers, can sometimes be obtained through online resources or through the states directly

Trend: WOTC certifications are becoming less reliant on backup documentation

Case study: First 11,000 certs in 2015 (continued)

89%Electronically

certified

In nearly 90% of the cases, WOTC screening data can be submitted electronically to the states for certification

This occurs either in bulk or on an individual basis

The only major state that current doesn’t allow electronic submission of data is New York

Trend: WOTC is moving toward electronic submission of data

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Walton’s Automation with Government Agencies

Automated

Pending

Automation

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SNAP, TANF and DCR Categories Overview

Supplemental Nutrition Assistance Program (Food Stamp) Recipient and TANF Recipient

• Age 18 to 39 years old, AND• A member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for:

The 6 months ending on the hiring date, OR At least 3 of the 5 months ending on the hiring date Typically, by far, the most common WOTC target group 44MM-45MM people on SNAP in a given year; or 21MM families 14.6% of U.S. population was on SNAP in 2014 Southeastern States ranged from 16-22 percent; states like California and Texas also in double digits Nearly 1.5MM families on TANF in 2015

Designated Community Resident (DCR)

• Age 18 to 39 years old, AND• Resides within one of the federally designated: Rural Renewal Counties (RRCs), OR Empowerment Zones (EZs) Large number of zone areas in United States


SNAP Category/Percent of Population Receiving Benefits


WOTC: Minimum Retention Periods/Hours Worked

Claiming the WOTC – is subject to employers meeting the “Minimum Employment or Retention Period” as follows:

TIER 1: WOTC is equal to 25% of “qualified” 1st-yr. wages if the “new hire” works at

least 120 hours.

TIER 2: WOTC is equal to 40%, “qualified” 1st-yr. wages, if the

“new hire” works at least 400 hours or more.


WOTC: Maximum Tax Credit Amounts By Category


WOTC: Veteran Target Group


Potential Tax Savings on WOTC

# Annual Hires Eligibility Rate Conversion Rate Avg. Cert Value Annual Tax Credits

300 15-20% 50% $1,000 $22,500-$30,000

500 15-20% 50% $1,000 $37,500-$50,000

1,000 15-20% 50% $1,000 $75,000-$100,000

5,000 15-20% 50% $1,000 $375,000-$500,000

1Assumption = 15-20% of your new hires are eligible for the tax credit

² Average value of a certification = $1,000. Companies hiring individuals from one of nine target groups receive $1,500 to $9,600 in tax credit savings per

qualified employee

Please note, the estimator above does not include an additional benefit if the tax credit certification obtained is also a Long-Term Family Assistance –LTFA

(formerly WTW) certification. LTFA certifications can more than double the value of your credit. The maximum value of each LTFA certification is $9,000.


How Do Employers Apply For WOTC?

Employers must complete form for each new hire:

• IRS Form 8850: “Pre-Screening Notice and Certification Request”

• ETA Form 9061 – “Individual Characteristics Form”

• ETA Form 9062 – “Conditional Certification” (this Form may be used in lieu of ETA Form 9061 if the new hire was pre-certified)


Forms Submission: IRS 8850 Form


Forms Submission: ETA 9061


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How Do Employers Manage the WOTC Program?

Step One: Screen all candidates for the WOTC Program on or before the date of job offer

• Candidates may be screened at the application or new hire/onboarding stage

Step Two: Submit signed 8850 forms within 28 days of hire

• Signatures may be submitted in wet or electronic formats, including via facsimile

• All states now accept electronic signatures on the 8850

• Certain categories require backup documentation regardless of WOTC process

• For example, discharge papers, driver’s license


How Do Employers Manage the WOTC Program?

Step Three: Monitor WOTC Program paperwork filing

• Respond to requests for additional information

• Contest denials

• Address terminated employees

• Post hire/pre certification handling

• Post certification

• Capture of any tax credit value and tracking – up to one year for most target groups, two years for long term assistance

Step Four: Calculate Tax Credit Value

• Track wages and hours

• Determine target group value

• Address terminated employees and employees who have maximized tax credit


Forms Submission, Step 1: Screening

Screening may be electronic, telephone/IVR, or paper based methodologies

required to determine eligibility of candidates for the WOTC Program

• Screening must include completion of IRS Form 8850

Many companies use an integrated approach to screening combining multiple

vendors’ services with the tax credit screening

• For example, WMS has integrated solutions with vendors in ATS,

employee benefits, background, and I-9 screening service vendors

Companies may also complete the WOTC Program screening as a standalone

process


Integrated ATS Solution: Candidate Flow

Candidate in applicant tracking or on-boarding system (ATS)

•Recruiter Module

•New Hire Module

Candidate Enters WMS Tax Credit Screening

•Enter as a applicant

•Enter as a new hire

Candidate Completes Tax Credit Screening Process

•Sent back to ATS

•ATS interface indicates whether candidate is potentially eligible for tax credits

•ATS interface to view backup documentation required and/or print forms if necessary

Candidate Completes ATS Process

•Client system sends data to WMS

•Cross comparison against incoming Candidates

•To update applicant stage candidates to new hire stage candidates

•To track candidates who never started or were terminated

•To track tax credit value


Form Submission Step Two: State Agencies

41 states allow for electronic filing of documentation, including the 8850 and ETA 9061

• Electronic data integration (EDI) option available with certain states, requiring adherence to technical specifications

Filing methodologies, format, and back up documentation requirements vary by state

• Failure to comply with filing format specific to state WOTC coordinator requirements may result in a denial


Form Submission Step Three: Certification and Credit Calculation

To maximize the opportunity for certifications, employers should

• Ensure all candidates are screened

• Ensure all candidates are screened timely

• Track all SWA submissions from submission to either denial or certification

• Review trends in denials and certifications

• Ensure any information or documentation that is still needed is obtained from employee and submitted


Form Submission Step Four: Obtaining Certifications


Form Submission Step Five: Addressing Denials

States may deny applicant WOTC Program certifications for a number of reasons:

• Individual did not meet the requirements of a target group

• Failure to provide proper documentation

• Late screening of new hire (post hire)

• Late submission of IRS Form 8850 for new hire

o Post 28 days unless retroactive opportunity exists

Why Work With Walton

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Why clients choose Walton

Key Differentiators

Superior results through innovative technology

Broad ecosystem of strategic partners

35+ years of tax credit experience

ASA Top 10 Emerging Technology Recipient


Adding Value Through Our Integrated Partners

Integration with the nation’s largest military job board

The veteran target group is the most lucrative WOTC credit at $9,600 per individual

Access to more than 800,000 veterans

Strategic hiring of veterans as part of an initiative to increase WOTC credits

Integration with the best-in-class Electronic I-9 and E-Verify provider

WOTC screening and electronic I-9 processing out of the same platform for increased efficiency

Excellent way to maximize WOTC results


Recap of Walton’s Technology

Smart phone and table screening

Mobile Doc Upload

SMS/Text Screening

Mobile Technology

Ease of access

Multi-level configurable permissions

Authentication

Customized data models

Credit Forecasting

Multi-dimensional Data Modeling

AlwaysON Reporting

Audit-ready

Data Agents

Smart phone document

upload

Next-Gen Reporting

Rest API

100% secure

Available 24/7

Cloud-based Technology

Brian DeVido

National Director, Business Development

☎ 732-660-4244

[email protected]

For More Information, Contact:

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mailto:[email protected]

Documents

Tax Credit Trends and Overview: Turning HR Departments ...... · Tax Credit Trends and Overview: Turning HR Departments Into A Profit Center December 8, 2016