Home Care agencies can significantly lower their business tax liability with the WOTC program. With a recently passed law, agencies have until June 29th, 2016 to lookback at caregivers who might have been eligible when they were hired in 2015. This is a one-time lookback period -- any future hires must have the paperwork completed before the hire date. Tax credits range from $2,600 to $9,600 per eligible caregiver hire. For ClearCare customers, the tax credit program is integrated, enabling agencies to check caregiver eligibility and submit the paperwork with a click. 20-30% of caregiver hires qualify for one of the qualifying categories and the average tax credit is $2,600. So, if your home care agency hired 50 caregivers in 2015, you may be eligible for 10 credits worth $2,600 each for a total of a $26,000 tax credit for your business. Most home care agencies are unaware of the program so we've included must know details below in a question and answer session with Sabrina Champagne, Director of Tax Credit Programs at GIS.
How do I take advantage of the WOTC program with ClearCare? Home care agencies can verify caregiver eligibility directly within the ClearCare home care software system. See the video below.
What is the Work Opportunity Tax Credit (WOTC) for home care?
The work opportunity tax credit (WOTC) offers federal tax savings to agencies hiring caregivers experiencing various barriers to gaining employment in the workforce. The IRS and US Department of Labor have established thirteen (13) categories for WOTC eligibility, including people ages 18 to 39 living in designated communities, recipients of various types of public assistance, and qualified veterans. This credit provides a federal income tax credit in the amount of 25% of gross wages paid to certified caregivers who work a minimum of 120 hours within the first two (2) years of employment. Once a caregiver accumulates 400 hours of employment, the credit amount increases to 40% of the gross wages paid until the credit amount has achieved is maximum value based on the qualifying category.
In order to claim the WOTC, an employer must file an application (Forms 8850 & 9061) with the appropriate state workforce agency (SWA) in order to obtain a WOTC certification. An agency must file this documentation within 28 calendar days after the eligible worker begins work. While the SWAs process the WOTC applications, the eligible caregiver should begin working for the agency and must work at least 120 hours before fully qualifying for the WOTC. The industry standard of WOTC eligibility in the home health care field consistently hovers around the 20% range; that means about one in five caregivers qualify for this federal income tax credit.
What recent changes have been made to the WOTC program?
The most significant change in the evolution of the WOTC program would be the creation of a new category: Long-Term Unemployment Recipients group. This category applies to new caregivers who have been unemployed for at least 27 consecutive weeks and who collected unemployment benefits at some point during that time. This category was created on December 18, 2015 and was included in the original WOTC extension.
Another milestone would be the long-term renewal of the WOTC Program. Historically, this federal hiring tax credit would experience periods of ‘hiatus’ when the effective dates of the program would expire and renew as Congress would continuously renew the program for only a year or two at a time. The renewal of 2015 includes an extension of the WOTC program through December 31, 2019. This means that agencies can earn credits through the end of 2021 for WOTC certified caregivers retained for two years from their start date.
Can I earn tax credits for caregivers I've already hired?
Typically, agencies must submit the WOTC application documents within 28 calendar days of a caregiver’s start date. Because the PATH Act extended the WOTC retroactively for 2015, and because the PATH Act created a new targeted group (qualified long-term unemployment recipients), agencies have been granted additional time to comply with the requirements of the tax code change. The Treasury Department and the IRS have granted additional time to file IRS Forms 8850 & 9061 with the SWAs. The extension gives agencies until June 29, 2016 to apply for WOTC for caregivers that were hired between January 1, 2015 and May 31, 2016.