Work Opportunity Tax Credit Wotc), One Form Thesis

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Work Opportunity Tax Credit WOTC), one form of activation, Eichhors, Kaufmann, and Konle-Seidl (2009) explain, was enacted in 1997 to replace the Targeted Jobs Tax Credit. Employers who hire individuals in the eligible groups receive tax credits.

The History of WOTC

Revision of the WOTC

WOTC Components

Eligible Groups

Family members, receiving food stamps; living in subsidized housing

"Vocational rehabilitation referrals iii. "Veterans receiving food stamps, and iv. "Ex-felons who are members of low-income families" (Eichhors, Kaufmann, and Konle-Seidl, 2009, p. 397).


Enhanced Considerations

Provisions C. on-the-job training, Wage Subsidy Program

Targeted groups

Provisions III. Conclusion

A. Summary of Findings




Work Opportunity Tax Credit

"Our new Constitution is now established, and has an appearance that promises permanency;

but in this world nothing can be said to be certain, except death and taxes"

- Benjamin Franklin (1706 -- 1790) (Columbia World…, 1996).

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Thesis on Work Opportunity Tax Credit Wotc), One Form Assignment

Benjamin Franklin (1706 -- 1790), U.S. statesman, writer, asserted in a letter, dated November 13, 1789, that taxes, as death, are two certainties in life (Columbia World…, 1996). Unemployment, albeit, constitutes one uncertainty in life currently meriting attention. As integrating wider segments of the working-age population receives more emphasis, activation serves as a primary topic in the U.S. And European labor and social market policies. In Bringing the Jobless Into Work?: Experiences With Activation Schemes in Europe and the U.S., Werner Eichhorst, Otto Kaufmann, and Regina Konle-Seidl (2009) conduct a comparative assessment "of the logic and the outcomes of activation" (p. xiii). The Work Opportunity Tax Credit (WOTC), one form of activation, enacted in 1997, succeeded the long-standing Targeted Jobs Tax Credit, which served disadvantaged job seekers from 1978 to 1994. The WOTC:

provides tax credits to employers who hire eligible workers. The eligible group includes welfare' and Supplemen-tal Security Income (SS1) recipients, those between the ages of IS and 24 who are members of families receiving food stamps or living in empowerment or enter-prise communities, vocational rehabilitation referrals, veterans receiving food stamps, and ex-felons who are members of low-income families. (Eichhors, Kaufmann, and Konle-Seidl, 2009, p. 397; )

The WOTC was later augmented by the Small Business Work Opportunity Tax Act (SBWOTA) (Eichhors, Kaufmann, and Konle-Seidl, 2009).

The History of WOTC

Mark E. Battersby (2007 [b])) a freelance writer and consultant on tax and financial issues, based in Ardmore, Pennsylvania, notes that tax laws routinely include provisions that basically cover a portion of the wages employers paid to new workers they hired from particular groups. Along with the WOTC, two provisions lawmakers have designated in this area included the Work Opportunity (WO) and "Welfare-to-Work (WTW) tax credits for a while. Battersby points out in the article: "The tax man cometh with good news," that the WO and WTW tax credits aimed to provide incentives so employers would hire economically disadvantaged individuals. Under IRC section 51, the WOTC-general law, the WOTC provides a significant incentive for employers to hire economically disadvantaged individuals. This including qualified ex-felons, food-stamp recipients, summer youth employees, veterans, along with individuals who receive certain welfare benefits (Altieri & Rothman, 2006, ¶ 23).

In a separate article Mark E. Battersby (2007) wrote, "The memorial day tax surprise," he notes that in 1996, the WOTC began to provide a unique tax incentive to employers for hiring individuals from among groups with significantly high unemployment rates or other individuals with special needs in regard to employment. Employers of large numbers of workers have reportedly been aware of the Work Opportunity Tax Credit for awhile. Prior to the passing of the Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 (SBWOTA), albeit, many of those who lived in rural counties did not know about the WOTC.

The SBWOTA expands the high-risk youth target groups so that they now include youth from rural renewal counties. The renewal counties consist of counties located outside of metropolitan areas that reportedly experienced lost populations during the 1990s (Battersby (2007 . In the article, "Hiring Incentives target veterans, rural counties," Alistair M. Nevius, (2007) editor-in-chief, explains that the SBWOTA expansion of the definition of numerous targeted groups, formed tax incentives that affect more clients than originally expected so that other employers living in rural areas, would be eligible for the WOTC. Pooled with the WTW incentives for 2007, "the WOTC enlists state employment security agencies to find and certify individuals who are members of a targeted group. Set to expire for employees hired after Dec. 31, 2007, the WOTC was extended through Aug. 31, 2011" (Nevius, Work Opportunity Tax Credit section, ¶ 3).

Stuart W. Margolis, and Brian L. Enverso (2007), both CPAs, stress in the article, "All you need to know about the new tax act," that the WOTC, a credit for wages the employer pays when he/she hires individuals from specific targeted groups, like most tax codes, may be beneficial for the employer to discuss concerns and/or issues with a professional tax adviser when he/she applies the rules.

Sarah Hamersma Department of Economics, University of Florida, and Carolyn Heinrich (2008) LaFollette School of Public Affairs and Institute for Research on Poverty, University of Wisconsin Madison, note changes that have influenced the low-skilled and disadvantaged workers' employment experiences. In the study, "Temporary help service firms' use of employer tax credits: implications for disadvantaged workers' labor market outcomes," Hamersma and Heinrich point out that recently not only have vital labor market changes influenced the employment experiences these particular targeted workers, a strong trend has intensified in these workers participating in the temporary help services (THS) employment sector. With the increase in THS employment, the temporary help service firms simultaneously increased as prominent labor market mediators for the targeted disadvantaged work groups (Hamersma & Heinrich).

A further significant trend, an increase in the employer's participation in hiring subsidy programs has also materialized. The WOTC, as well as the Welfare-to-Work Tax Credit (WTW) utilize federal income tax credits to reimburse employers for up to 50% of the worker's wages of the worker who encounters particular employment challenges. Objectives for the investment of this effort include:

Assisting the disadvantaged and low-income individual secure labor market experience, improve the targeted individual's work skills, help the targeted individual maintain his/her job longer (Hamersma & Heinrich, 2008).

In the past, Hamersma and Heinrich (2008) explain, the fact that an increasing number of individuals working toward certification for the WOTC actually received certified through work at THS firms did not merit much attention. Contrary to the legislative aim to subsidize long-term positions, the majority of THS firms, in spite of their role as labor market intermediaries instead of end-user employer, qualified to claim the WOTC.

Hamersma and Heinrich (2008) conduct an empirical investigation to examine how the subsidies and the temporary nature of employment affect worker outcomes in subsidy-certified THS jobs. Hamersma and Heinrich address two primary questions:

1. Do THS firms' claims of these subsidies affect the labor market outcomes of their workers?

2. & #8230;Among disadvantaged workers in subsidized firms, how do the labor market outcomes of THS workers compare to those of workers in traditional jobs? (Hamersma & Heinrich, 2008, ¶ 3).

From the survey implemented in their study, Hamersma and Heinrich (2008), find that THS firms may not be utilizing the opportunity to maintain tax credits for disadvantaged workers to intentionally increase the hiring of disadvantaged workers. Basically, these firms do not possess information regarding whether the individual's status does or does not qualify him/her for the tax credits when he/she is hired. Even after the employer makes his/her hiring decision, information regarding employees claimed for WOTC is confidential information. In fact, one firm responded in the telephone survey Hamersma and Heinrich conducted: "The information is sent to our corporate office, a third party processes the forms, and the tax credits come back to us like a bonus" (Hamersma & Heinrich, 2008, Findings from a Survey of… section, ¶ 3). Basically, the firms who do utilize the WOTC receive "bonuses" for inserting a form in the hiring packets and mailing them for processing. The WOTC, according to Hamersma and Heinrich does not improve the disadvantaged workers' future labor market outcomes.

Ultimately, Hamersma and Heinrich (2008) conclude that their initial aim to identify the distinctive effects that temporary employment and employer subsidies exert on the labor market outcomes of worker certified for the tax credit programs through work for THS firms, revealed that one may not merely compare average employment outcomes of the targeted workers to others either not certified or nontemporary. Understand the effects of the subsidy or temporary work, Hamersma and Heinrich argue, does not prove adequate, as characteristics such as the person's age, gender, race, as well as his/her education level differ significantly substantially between each group. In addition, employer characteristics, e.g. The firm's size, may also predict the participation in the WOTC subsidy program, a factor that also needs consideration when one assesses the effects of subsidies.

Revisions relating to the WOTC

Initially, Eichhors, Kaufmann, and Konle-Seidl (2009) assert, activation appears to be an enticing… [END OF PREVIEW] . . . READ MORE

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