The Work Opportunity Tax Credit (WOTC) provides a tax credit to employers who hire individuals in designated targeted groups. The credit ranges from $2,400 to $9,600 per employee, depending on the targeted group and the amount of wages paid.
The credit required a 28-day deadline for submitting certification of the hire. However, due to a retroactive extension of the credit that makes the WOTC valid for hires between January 1, 2015 and December 31, 2019, the IRS is extending the filing deadline.
Employers who hired qualified individuals on or after January 1, 2016, and on or before May 31, 2016 have until June 29, 2016 to submit the required IRS forms to the state workforce agency. Beginning June 1, 2016, employers must submit the required forms for all targeted groups within 28 days of an individual beginning work; forms submitted more than 28 days after the employee’s start date will be disallowed and ineligible for the WOTC.
WOTC program federal income tax credits apply to hiring individuals in the following targeted groups:
- Members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program
- Qualified veterans
- Qualified ex-felons
- Designated community residents
- Vocational rehabilitation referrals
- Qualified summer youth employees
- Qualified supplemental nutrition assistance program (SNAP) recipients
- Qualified supplemental security income (SSI) recipients
- Long-term family assistance recipients
- [New as of 1/1/2016] Qualified long-term unemployment recipients – any individual unemployed for 27 consecutive weeks or more, including the period of time the individual received unemployment compensation under state or federal law.
Employers must file IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and U.S. Department of Labor Form 9061 or 9062, Individual Characteristics Form, to the state workforce agency (see above date requirements). Employers are encouraged to submit forms in one submission to the state agency for certification. The employer may only claim the WOTC after certification is verified.
If you have questions regarding this or other tax credits, please talk with a Salmon Sims Thomas tax advisor.