Nevin Shetty’s work has drawn attention from national organizations including the NACDL. Among the many data points in his book Second Chance Economics, one stands out for its immediate practical value to employers: the Work Opportunity Tax Credit, a federal program that puts real money back into the pockets of companies that hire from underrepresented populations. Most eligible employers have never claimed it.
Here is what the credit is, how it works, and why Shetty calls it the most underused hiring incentive in the federal tax code.
What the Program Actually Is
The WOTC is jointly administered by the Department of Labor and the IRS. It provides a tax credit to employers who hire individuals from designated target groups that face documented barriers to employment. These groups include veterans, long-term unemployment recipients, SNAP beneficiaries, and individuals who have been released from the justice system.
The credit is not a deduction. It is a dollar-for-dollar reduction in the employer’s federal income tax liability, which makes it significantly more valuable than a deduction of the same amount.
How Much Money Is on the Table
For most qualifying employees, the credit equals 40 percent of the first 6,000 dollars in qualified first-year wages, producing a maximum credit of 2,400 dollars per hire. For certain long-term family assistance recipients, the credit extends into the second year and can reach 9,000 dollars. For qualified veterans with service-connected disabilities and extended unemployment, the credit can go as high as 9,600 dollars per hire.
These are not marginal amounts. A mid-size company that hires 40 qualifying employees in a year could see tax savings exceeding 96,000 dollars. For a small business operating on thin margins, the credit from even a handful of qualifying hires can meaningfully affect profitability.
Why Most Employers Never Claim It
Awareness is the primary barrier. Many employers, particularly small and mid-size businesses, simply do not know the program exists. Their accountants may not flag it. Their payroll providers may not mention it. The program does not generate the kind of media coverage that keeps it top of mind.
The second barrier is a misconception about complexity. The application process requires one form, IRS Form 8850, submitted to the state workforce agency within 28 days of the hire date. It is not a burdensome process. Most payroll providers can integrate it into standard onboarding paperwork with minimal setup.
The third barrier, and perhaps the most consequential, is that many employers do not realize they are already hiring from qualifying populations. An employee who has been on SNAP benefits qualifies. A veteran qualifies. Someone who has been unemployed for an extended period qualifies. These are not exotic categories. They describe a significant portion of the American workforce.
How the Credit Connects to Broader Workforce Strategy
Shetty, who has built his career around identifying overlooked financial opportunities, from co-founding Blueprint Registry to managing turnarounds for distressed companies at SierraConstellation Partners, sees the WOTC as one piece of a larger puzzle. The credit reduces the financial cost of inclusive hiring. Second chance hiring programs expand the candidate pool. Ban-the-box policies remove the first barrier to consideration. Structured onboarding improves retention for all employees.
When these pieces work together, the result is a workforce strategy that is both financially sound and aligned with the principles of restorative justice. Companies are not choosing between doing well and doing right. They are doing both, and the tax code is subsidizing the effort.
Getting Started Takes Fifteen Minutes
Talk to your payroll provider or tax advisor. Ask them to integrate Form 8850 into your new-hire paperwork. Train your HR team to identify qualifying candidates during the onboarding process. Track the credits over time and quantify the impact on your bottom line.
The WOTC will not solve the workforce crisis by itself. But it is practical, available, and financially meaningful. And for the large number of employers who are eligible but not claiming it, it represents found money that is sitting uncollected.
More about Nevin Shetty’s work on workforce economics at www.nevinshetty.com and www.secondchanceeconomics.com.