What is the Work Opportunity Tax Credit (WOTC) - and how can Texas employers use it?

If you hire workers in Texas and you've never heard of the Work Opportunity Tax Credit, you may have left thousands of dollars on the table. Here's everything you need to know and how partnering with a second chance staffing agency makes claiming it simple.

What is the WOTC?

The Work Opportunity Tax Credit (WOTC) is a federal tax incentive administered by the IRS and the U.S. Department of Labor. It rewards employers who hire individuals from specific groups who have historically faced significant barriers to employment.

In plain terms: the federal government pays you — through a tax credit — to give certain people a job. Credits range from $1,500 to $9,600 per qualifying hire depending on the employee's target group and hours worked.

This is not a deduction. It's a dollar-for-dollar reduction in your federal tax liability.

Key fact: Employers can claim WOTC for an unlimited number of qualifying hires. There is no cap on the number of employees or total credits per year.

Who qualifies as a WOTC-eligible employee?

The IRS designates ten target groups for WOTC eligibility. The most relevant for employers working with BPrep Services include:

Up to $9,600Ex-felons hired within one year of conviction or release from prison

Up to $9,600Long-term TANF (welfare) recipients

Up to $5,600Veterans with service-connected disabilities

Up to $2,400Individuals referred by vocational rehabilitation programs

Up to $2,400Summer youth employees from low-income areas

Up to $1,500Short-term TANF recipients and SSI recipients

For formerly incarcerated individuals — the core of BPrep's candidate pool — the maximum credit is $2,400 for employees who work at least 120 hours, and up to $9,600 for long-term family assistance recipients. The employee must be hired within one year of their release or conviction date.

How much can your business actually save?

The credit amount is calculated as a percentage of first-year wages paid to the qualifying employee:

For most target groups: 40% of first-year wages up to $6,000 = a maximum credit of $2,400 per hire. For long-term family assistance recipients: 40% of first-year wages up to $10,000 in year one, and 50% of second-year wages up to $10,000 — totaling up to $9,000.

For a company that places 20 qualifying hires in a year, that's a potential $48,000 reduction in federal taxes. For 50 hires, you're looking at $120,000 or more.

Example: A Dallas warehouse operation hires 15 returning citizens through BPrep Services at $15/hr. Each works full-time for a year. At 40% of $6,000 in qualified wages, that's $2,400 × 15 = $36,000 in federal tax credits — in a single year.

How do you apply for the WOTC?

The process is straightforward but time-sensitive. Here's how it works:

1

Employee completes IRS Form 8850 — This pre-screening notice must be completed on or before the day a job offer is made.

2

Submit to your State Workforce Agency within 28 days — In Texas, this is the Texas Workforce Commission (TWC). The form must be postmarked within 28 days of the employee's start date. Missing this window disqualifies the hire.

3

Receive your certification — The TWC reviews the application and issues a certification if the employee qualifies.

4

Claim the credit on your federal tax return — Use IRS Form 5884 to calculate and claim the credit. Your tax professional handles this step.

Why second chance hiring + WOTC is a smart business strategy

Beyond the tax savings, employers who embrace second chance hiring consistently report strong outcomes. Returning citizens are often among the most motivated and loyal employees in the workforce — precisely because they understand the value of a real opportunity.

At BPrep Services, we've placed over 338 second chance workers across North Texas — with a 92% retention rate. Our candidates are pre-screened, onboarded, and supported with transportation so your shift coverage stays reliable.

That means you get dependable workers, meaningful tax savings, and a workforce strategy that actually reflects your company's values.

How BPrep Services makes this easy for employers

Navigating WOTC paperwork alongside high-volume hiring is a lot to manage. When you partner with BPrep Services, we help identify which of our candidates qualify for WOTC, guide you through the Form 8850 process, connect you with the right Texas Workforce Commission resources, and make sure you never miss the 28-day filing window.

You focus on running your operation. We handle the workforce — and make sure you're getting every dollar you're entitled to.