Double-dipping occurs when the same payroll dollars are claimed for multiple tax benefits, violating IRS regulations. Employers looking to optimize incentives like the Work Opportunity Tax Credit must carefully allocate payroll to ensure compliance. This guide explains double-dipping, its prohibition, and how to maximize WOTC benefits legally.
What Is Double-Dipping in WOTC?
Double-dipping involves claiming the same wages for multiple tax credits. Employers must ensure that wages designated for WOTC are not used for other incentive programs. For example, if 100% of an employee’s wages are claimed for WOTC, those wages cannot also be allocated to another credit. Accurate payroll planning is essential.
Is Double-Dipping Allowed?
No, double-dipping is strictly prohibited. Each payroll dollar for WOTC cannot be claimed under any other tax incentive. Employers must clearly designate qualifying wages and avoid overlap through effective tracking and strategic allocation.
Key Considerations for Employers
To maximize WOTC while remaining compliant:
- Track Payroll Expenses: Maintain thorough documentation of wages used for WOTC.
- Strategically Allocate Wages: Prioritize wages for WOTC to fully leverage the credit.
- Consult Experts: Engage tax credit professionals to ensure compliance and optimize benefits.
What Is WOTC?
The Work Opportunity Tax Credit encourages hiring individuals from groups facing employment barriers, such as veterans and long-term unemployed individuals. WOTC offers a tax credit of up to $9,600 per eligible employee. Careful tracking and wage allocation enable businesses to maximize benefits while minimizing compliance risks.
While double-dipping is not an option, effective planning can help you fully leverage WOTC for your business. For expert guidance on maximizing your WOTC savings, please contact us today.
