WOTC Questions: Can Staffing Agencies Take Advantage of the Work Opportunity Tax Credit?

Are staffing services eligible to receive WOTC credits in a Temp-to-hire situation? That is, the employee is on the Staff agency payroll for 90 days, then rolls over to the actual employer.

At CMS, as WOTC experts and service providers since 1997, we receive a lot of questions via our website. In the case of the above question, the sender did provide their email address, so we were able to reply directly to them. This is one of the more common questions (FAQ), so we thought we would share, and hopefully will help others too.

WOTC Subject Matter Expert, Brian Kelly tells us: The Work Opportunity Tax Credit is computed by Federal ID number. In order to be eligible an agency employee must work a minimum of 120 hours. Temporary employment and staffing agencies can take advantage of the Employment Tax Credits for the time the new hire works for their company.  With 120 hours worked, a qualified employee is eligible for a 25% credit on the first $6,000 of wages received.

If the employee is later hired by the company they were assigned to by the agency, that company may also be eligible for a tax credit.

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