We’re finishing up our series of WorkOne programs this month with two programs providing incentives to employers: Work Opportunity Tax Credits and the Federal Bonding Program.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit for private, for-profit employers, which encourages them to hire job seekers who traditionally have difficulty finding employment. This can include some Hoosier Veteran groups, individuals using income-based support programs, individuals with a past criminal history, job seekers with disabilities, and certain groups of Hoosier young adults.
As an employment consultant, you should know that the WOTC should not be used as a singular tactic to persuade an employer to hire someone, but rather, it’s something you should have in your toolkit to speak with employers about. You can let them know that a tax credit might be a possibility, but as an employment consultant, you won’t need to worry about eligibility determination—whether a potential employee fits into one of the categories mentioned above. Employers, themselves, will be able to figure that out, usually using new-hire paperwork, completed when someone first starts employment.
Cash or credit?
Work opportunity credits are just that, employer tax credits for hiring someone in one of the categories listed above. Employing these individuals and providing opportunities for workforce stability can enable an employer to earn a credit when they file their end-of-the-year taxes—if, of 
course, they follow all the required regulations and reporting. No cash is given to the employer, but credits are added to their filing to help bring down their required financial obligation. The obligations are strict, and businesses must follow them appropriately to participate and gain the credits.
The employer can use IRS Form 8850, which must be submitted within 28 days after the applicant’s start date. This form is typically how employers find what categories a new hire may fall into. It is a checkbox form that asks the individual if they are or have been in a particular priority category. There are questions like, “Are you a veteran?” or “Have you been unemployed for 27 consecutive weeks?” Many other questions ask if the new hire has been on or is receiving Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), or working with Vocational Rehabilitation. Once the new hire checks one of these boxes, it prompts the employer to then ask more questions and triggers additional forms, that are pertinent to each category they have checked (Like Form 9061, or 9062).
Show me the credits!
Typically, employers can receive 40% of the first $6,000 of earned income for most eligible employees in their first year at the company. For student employees, however, employers receive a lower rate, set at 20% of the first $3,000 earned. Some credits can assist employers/businesses make facility modifications that may be necessary for employee accommodations. This could include things like ramps, elevators, electronic doors, and more. Again, the business would pay for those modifications or changes up front; credits would then be applied come tax time. To receive credits, employers must also file for them in advance.
Re-entry coverage
The Federal Bonding Program, administered through WorkOne, helps individuals who have been involved with the criminal justice system to re-enter the workforce. The bond is typically $5,000 but can go as high as $25,000 for an individual. A bond acts as an insurance policy, with most lasting up to six months. It enables an employer to “take a chance” on a potential candidate, who may have 
a criminal record. The bond covers up to the amount specified should the newly hired employee do some sort of damage or cause a loss to the business.
Let’s say, for example, a new employee who had been in the justice system because of theft begins working in construction, and, after a few weeks on the job, he steals two pieces of equipment worth $2,200 and $1,800. The employer would carry out actions of discipline, up to termination in this situation, and would then follow up with the bond. The bond would pay the employer $4,000 to help cover the loss of the equipment.
The bonding program helps individuals with a criminal history find employment, start new, and prove to themselves that they can be a productive part of society. The program also helps employers who want to help by hiring people who need a chance, and, finally, it helps decrease recidivism or the likelihood of an individual returning to crime, which is good for all of us. It is really a win-win for you, as an employment consultant; the job seeker you are working with; the employer; and, most of all, the community at large.
The Federal Bonding Program does have rules and guidelines, and you should explore those on a case-by-case basis. This is another tool in your toolkit to use when you find employers who are interested but may need that extra bit of “insurance” to hire a job seeker.
Resources
- Federal Bonding Program in Indiana
- Highlights of the Federal Bonding Program (PowerPoint presentation)
- Work Opportunity Tax Credits