January 17, 2025
In this article, we’ll explore what tax credit screening involves, its benefits for employers, how it works with different tax credit programs, and why businesses should implement it. We’ll also discuss how automation and technology can streamline the process, making it more efficient and error-free.
Tax credit screening is the process in which businesses evaluate their employees to determine if they qualify for certain tax credits offered by the government. These tax credits are designed to incentivize businesses to hire and retain individuals from specific groups, such as veterans, ex-felons, and long-term unemployed people. The most common tax credits that businesses can claim through screening include:
The tax credit screening process helps businesses identify which of their employees are eligible for these credits, ensuring they don’t miss out on valuable savings. The process typically involves filling out forms like IRS Form 8850 for WOTC and submitting them to the appropriate state agencies. Businesses can receive substantial financial benefits by screening all new hires and existing employees.
The advantages of tax credit screening extend far beyond the immediate tax savings. Here are the key benefits:
Tax credit screening offers a direct way to reduce your company’s tax liabilities. For instance, businesses can earn up to $9,600 for each qualified new hire under the WOTC program, depending on the employee’s target group. This can result in substantial savings, especially for companies that frequently hire new employees from these target groups.
By conducting tax credit screening, businesses ensure they comply with all necessary tax laws and avoid costly penalties. Submitting the correct forms, such as IRS Form 8850 for WOTC, helps employers stay on the right side of the law and reduces the risk of audits.
Integrating tax credit screening into your hiring process streamlines recruitment and helps you identify individuals who can provide tax benefits. Many software solutions allow seamless integration with your applicant tracking systems (ATS), ensuring that eligibility checks for tax credits are performed as part of the regular hiring process.
In addition to the WOTC, the Employee Retention Credit (ERC) rewards businesses that retain employees, even during economic downturns. By using tax credit screening, employers can easily identify employees who qualify for retention credits, helping businesses maintain a stable workforce and reduce payroll expenses.
One of the most significant programs eligible for tax credit screening is the Work Opportunity Tax Credit (WOTC). This credit is designed to encourage employers to hire individuals from specific target groups, including:
For businesses to claim the WOTC, they must screen their employees to determine if they belong to one of these eligible target groups. The tax credit screening process typically involves the following steps:
The tax credit screening process is not only about identifying eligible employees but also ensuring that the required paperwork is completed accurately and submitted on time. Employers can earn anywhere between $2,400 to $9,600 per hire depending on the specific target group and the number of hours worked by the employee.
With advancements in technology, many employers now rely on software solutions to automate and simplify the tax credit screening process. By using tax credit software, businesses can seamlessly integrate the screening process with their existing applicant tracking systems (ATS) and payroll software. This integration ensures that eligibility for tax credits is evaluated without extra manual effort.
Software platforms like Avvanz help employers save time, streamline their tax credit screening efforts, and maximize their potential savings by automating the entire process.
Even though tax credit screening is designed to be straightforward, some employers make mistakes that hinder their ability to claim the credits successfully. Here are some common errors to avoid:
Not all employees will qualify for tax credits. It's crucial to carefully assess the eligibility of each new hire and make sure they meet the criteria for programs like WOTC. Overlooking important eligibility details can result in missed opportunities for savings.
Filling out forms like IRS Form 8850 correctly is essential to ensure tax credits are claimed. Employers should verify that all information is accurate and complete before submitting to prevent delays in the processing of their claims.
Once forms are submitted, it’s important to follow up on the status of your claims. Failure to track the results or submit additional information when required can delay the processing of your tax credits.
Avvanz offers an automated and efficient solution for businesses looking to streamline their tax credit screening process. With Avvanz, employers can ensure they are fully leveraging available tax credits while minimizing administrative tasks.
With Avvanz, businesses can easily navigate the complex world of tax credit screening and claim all available credits, making it an invaluable tool for financial success.
In conclusion, what is tax credit screening? It’s the process that businesses use to identify employees who qualify for valuable tax credits like the Work Opportunity Tax Credit (WOTC) or Employee Retention Credit (ERC). Implementing an efficient tax credit screening process can save businesses significant amounts of money, ensure compliance, and streamline hiring practices.
If you're ready to unlock tax savings and optimize your tax credit screening process, consider partnering with Avvanz. Our automated solutions make it easy for businesses to claim their eligible tax credits quickly and accurately.