What is it: The Work Opportunity Tax Credit is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. The target groups includes veterans, temporary assistance for needy family (TANF) recipients, supplemental nutrition assistance program (SNAP) recipients, designated community residents, vocational rehabilitation referrals, ex-felons, supplemental security income (SSI) recipients, summer youth employees, and qualified long-term unemployed. Employers can earn a tax credit of between $1,200 and $9,600 per employee, depending on the target group of the new employee and the number of hours worked in the first Year. For the long-term Temporary Assistance for Needy Families (TANF) target group only, the credit is available to employers who hire members of this group for up to a two-year period. In the first year, the employer may claim a tax credit equal to 40% of the first-year wages, up to the maximum tax credit, if the individual works at least 400 hours. In the second year, the employer may claim a tax credit equal to 50% of the second-year wages, up to the maximum tax credit, if the individual works at least 400 hours. For all other target groups, the credit is available to employers who hire members of these groups, based on the individual’s hours worked and wages earned in the first year. If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual’s first year wages, up to the maximum tax credit. If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual’s first year wages, up to the maximum tax credit.
How do you get it: Visit https://www.doleta.gov/business/incentives/opptax/wotcEmployers.cfm for the applicable applications. According to the United States Department of Labor “To apply for WOTC, employers should follow these steps:
- Complete IRS Form 8850 by the day the job offer is made.
- Complete ETA Form 9061, or complete ETA Form 9062 if the employee has been conditionally certified as belonging to a WOTC target group by a State Workforce Agency, Vocational rehabilitation agency, or another participating agency.
- Submit the completed and signed IRS and ETA forms to your State Workforce Agency. Forms must be submitted within 28 calendar days of the employee’s start date.
- Wait for final determination from your State Workforce Agency. The determination will indicate whether the employee is certified as meeting the eligibility for one of the WOTC target groups.
- After the target group employee is certified by the State Workforce Agency, file for the tax credit with the Internal Revenue Service.
When does it expire: According to the United States Department of Labor “ On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) that extends and modifies the WOTC Program and the Empowerment Zones. In summary, the PATH Act: Retroactively reauthorizes the WOTC program target groups for a five-year period, from December 31, 2014 to December 31, 2019. Extends the Empowerment Zones for a two-year period, from December 31, 2014 to December 31, 2016. Introduces a new target group, Qualified Long-term Unemployment Recipients, for new hires that begin to work for an employer on or after January 1, 2016 through December 31, 2019” (Work Opportunity Tax Credit, 2018).
For more information you can call Harris CPA’s and we can assist in determining if you qualify and what is necessary to claim the credit.
By Audrey Florence – Harris CPAs
Employers. (2018, March 22). Retrieved July 30, 2018, from https://www.doleta.gov/business/incentives/opptax/wotcEmployers.cfm
Work Opportunity Tax Credit. (2018, April 10). Retrieved July 22, 2018, from https://www.doleta.gov/business/incentives/opptax/
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