Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g., food stamp recipients), each of whom is paid $9,000 during the year. As a result of this event, Cardinal Corporation may claim a work opportunity credit of:

Question

Quizplus · Accepted Answer

The work opportunity tax credit (WOTC) is a tax credit provided to employers who hire individuals from certain targeted groups who have faced employment barriers. The credit is based on a percentage of qualified first-year wages, up to a maximum amount, for each eligible employee.

For employees certified as eligible members of a targeted group, including food stamp recipients, the maximum credit is 40% of the first $6,000 of qualified first-year wages paid to the employee, which amounts to $2,400 per employee.

In this case, Cardinal Corporation hired two eligible employees and paid them each $9,000 during the year. However, since the maximum WOTC credit is based on the first $6,000 of wages, the credit for each employee is $2,400, for a total credit of $4,800 (2 employees x $2,400 per employee).

Therefore, the correct answer is C, $4,800.

Cardinal Corporation Hires Two Persons Certified to Be Eligible Employees