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What Is Washington State Long-Term Care Payroll Tax? Know It All Here

The WOTC tax credit is for all Washington workers, and the information is for the state employees with questions about limited exemptions and the program’s premium. The WA Cares fund, or the Washington State fund, is a mandatory new long-term care insurance benefit that firms can use to buy professional care, equipment, house safety evaluations, and compensation for the family members who care. Another name for the Washington State long-term care fund is the Long-Term Services Supports (LTSS) program.

Update: On Jan 27, Governor Inslee signed two bills passed in the Legislature, making key improvements in LTSS/WOTC tax credit. These reforms address coverage gaps while delaying the program’s implementation by 18 months. The OF analyzes the impact of legislation and updates the below information.

Starting Oct 1, Washington workers start seeking exemptions to the new long-term care tax of the state. The tax finances are the so-called “WOTC tax credit,” the program that was passed in the state Legislature in 2019. The program acts as a state insurance plan for long-term care. It is for helping the eligible adults pay for services like dementia support and home-delivered meals.

From Jan 1, 2022, the state will start taxing employees. The tax is 0.58% of the total wages of the workers, without any salary cap. The employee earning $100,000 pays $580 into the fund.

However, no exemptions are there for the payroll tax deferment. Adults buying long-term private care insurance before Nov 1 won’t need to pay the tax. The government also offers an exemption to firms for the same.

We’ll know about the WOTC with frequently asked questions and their answers, such as how to file for an exemption, etc.

Why Did The Government Make WA Cares?

The bill’s authors argued that most older adults pay a lot for long-term care. The Washington AARP estimates around 70% of the Washington residents will need to have long-term care; the program proponents said that most don’t have plans to pay for the care.

How Does This Program Work?

The benefits of the WOTC tax credit begin from Jan 1, 2025. The eligible adults get more than $100 per day for 365 days, meaning they have access to $36,500 for the long-term care costs for their whole life. The benefits are out for up to a year when people spend up to the maximum amount daily.

How Do Contributions work?

As needed in the Long-Term Supports Trust Act and services under the RCW 5B.04.080, starting from Jan 1, 2022, the Washington state deducts a long-term care premium from the paycheck. The premium rate is 0.58% or 58 cents per $100 of the earnings. Your employer should collect the premiums from the employees through the payroll deductions and remit the collected amounts to the Employment Security Department (ESD). All the Washington workers, like the state-employed ones, contribute to earning lifetime benefits of $36,500 (with annual adjustment for inflation). You only contribute to the WA Cares Fund while working.

From When Are The Exemptions Effective?

Exemptions are effective in the quarter after you get approval. You get an exemption approval letter from the ESD stating the date. You are responsible for paying the non-refundable WOTC tax credit WA Care premiums to the effective date of exemption.

For example:

When you get a WOTC tax credit exemption approval letter from the ESD after Dec 31, 2021, it won’t take effect until Apr 1, 2022 (the quarter after you approve the application). Employers withhold non-refundable WA Care premiums for the quarter before the effective exemption date, Jan 1, 2022, to Mar 31, 2022.

Suppose you submitted an application for ESD exemption before 12/31/2021 but didn’t get an approval letter before that date. In that case, you won’t be responsible for paying non-refundable WA Care premiums on the WOTC tax credit beginning from 1/1/2022. If you got an exemption approval from the ESD before 12/31/2021, then the premiums won’t deduct starting from 1/1/2022.

When employees fulfill their application for a WA exemption from the WA Cares on or before Dec 1, 2021, they guarantee that they process it before premiums are into effect in Jan.

Who Are Eligible?

To qualify for the WOTC tax credit benefits, adults should verify that they need help with at least three aspects of daily living. These include personal hygiene, medication management, bathing, dressing, and eating.

The adults who qualify for benefits in either of the two ways need to be working and paying into the program for three years since they applied for benefits. They will need to work at least 500 hours per year – for roughly 12 hours per week in those years.

Alternatively, someone would qualify for WOTC tax credit when they worked and paid into the program for ten years, as long as they worked for at least five consecutive years in those ten years. They also have to work at least 500 hours in those ten years.

Employees moving out of Washington won’t have the benefits, even when they pay into the program. Also, employees who opt out of tax through exemption don’t get the benefits.

Who Is Subject To The Tax?

The WOTC tax credit includes the workers who perform services out of the state with their operations or direct services from a specific location but live in Washington and are subject to tax. All the employees in Washington are subject to the tax. Workers are said to be “employed in Washington” when their services are in the state.

Who Qualifies For An Exemption?

People who buy long-term private care insurance before Nov 1 qualify for an exemption. The self-employed workers opt for the program when they wish, but they don’t need to.

Employers also get exemption from the WOTC tax credit, but they expect to collect taxes from the employees and remit them to the Employment Security Department of the state.

How To Apply For An Exemption?

Applications are available on WA Cares Fund Site on Oct 1. If you bought a long-term care plan or expect to before Nov 1, look for the state office of the Insurance Commissioner to ensure that the plan qualifies under the exemption criteria of the program. The office has guidance on the site. Employees can apply for an exemption from Oct 1, 2021, to Dec 31, 2022.

Why Did They Establish The Program?

The bill authors argued that many old adults pay a lot for long-term care. The Washington AARP estimates around 70% of the Washington residents would need long-term care: proponents of the program said that most don’t have any plans to pay for the care.

$36,500 is a bucket drop from what some long-term care WOTC tax credit services cost. However, people who pay for pricey services like a nursing home or assisted living care can use the money with personal or Medicaid funds. It helps to offset such expenses. Meanwhile, people who don’t need such care can use their WA Care Funds on less costly services rather than paying straight away.

Conclusion

WA Cares WOTC tax credit offers long-term care benefits when you won’t retire for three or more years. The benefits are for workers living briefly out of state on non-immigrant visas, on-duty military members’ spouses, and veterans of service-linked disabilities who seek opt-outs beginning in Jan 2023. The bill in late Jan offers some room for exemption.

To know more about the Washington State Long Term Care payroll WOTC tax credit benefits, you can get help from the niche experts of Business Tax Benefits. Other than that, you can check the official website of the WA Cares Fund.

We offer vetted solutions for filing taxes, full benefits of the Washington Long Term Cares Act, and many others. Business Tax Benefits is at the forefront to get solutions for Employee Retention Tax Credit, WOTC Tax Credit, Payroll Tax Deferment, and everything tax-related.

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