Gary Romano, Chief Strategy Advisor, Civitas Strategies, has personally advised thousands of small businesses.
Many small businesses are barely hanging on in today’s uncertain economic climate. These are not the high-growth startups that attract venture capital or the well-established firms with full finance teams. They are what my company calls forgotten small businesses—micro-businesses vital to families and communities yet often left out of traditional business support networks.
These businesses—from child care providers to neighborhood shops—operate on razor-thin margins and rarely have access to the strategies, talent or time that larger companies do. But they do have one powerful tool at their disposal, often overlooked and underused: the Work Opportunity Tax Credit (WOTC).
What Is The Work Opportunity Tax Credit?
The WOTC is a federal tax credit available to employers who hire individuals from specific groups that face “significant barriers to employment”—including recipients of Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), veterans, individuals formerly incarcerated, long-term unemployed individuals and others.
To qualify, employers must submit IRS Form 8850 and Department of Labor Form 9061 or 9062 to their state within 28 days of the employee’s start date. The maximum credit ranges from $1,200 to $9,600 per eligible employee, depending on the target group and number of hours worked.
For example, a long-term TANF recipient hired at $18/hour and working full-time could generate $7,000 in tax credits—for a hire the business likely would have made regardless.
Why Isn’t The WOTC Being Used?
Despite its value, I’ve noticed the credit remains underutilized among small and micro-businesses. Based on my organization’s work with hundreds of small employers, particularly in the child care sector, we’ve found three key reasons:
• Lack Of Awareness: Many business leaders don’t even know WOTC exists.
• Poor Timing: The credit requires time-sensitive paperwork that many miss.
• Perceived Complexity: With limited administrative capacity, many businesses don’t pursue it, yet the forms are straightforward.
Moreover, research suggests the WOTC doesn’t significantly alter hiring behavior. But that misses the point for forgotten small businesses. They’re already hiring from these target groups—not for a tax break, but because these workers are integral members of their communities.
I recently spoke to a child care support organization that helps families find care and connects providers to job seekers. When they reviewed their referrals, they found most candidates were WOTC-eligible, including those on public assistance and young adults with limited work experience. Providers hiring from these referrals were already eligible for thousands in credits—they just weren’t claiming them.
How Intermediaries Can Help Bridge The Gap
Many small-business owners don’t access the WOTC simply because they lack the information or capacity to start. But awareness won’t spread on its own. That’s where intermediaries—business coaches, support organizations, funders and policy advocates—can make the difference. They have the insight and infrastructure to overcome those barriers and help small businesses unlock the value they’re already earning.
Here’s how:
• Provide information. The biggest barrier is a paucity of information. Chambers of Commerce and business coaches and support organizations can share information on WOTC generally, as well as specifically to businesses where it may be most beneficial.
• Integrate it into hiring systems. Help businesses add a simple WOTC screening question into onboarding or job applications. This small change could yield significant savings. I’ve found the best time to have a candidate fill the form out is prior to hiring.
• Build it into technical assistance. Government and philanthropic programs supporting business growth can incorporate WOTC into their models, helping stabilize high-impact but low-margin businesses. For funders, WOTC credits can be a trackable outcome, showing real financial benefits tied to hiring practices.
Rewarding What They’re Already Doing
Many small businesses are already hiring people who need a second chance—parents returning to the workforce, young adults aging out of foster care and veterans transitioning to civilian life. They can get recognition and reward for doing so, and the Work Opportunity Tax Credit is built to do exactly that.
It doesn’t take much to make a difference. But the impact? It could be the margin that keeps a business afloat.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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