The new economic stimulus law expands the Work Opportunity Tax Credit (WOTC) to allow you to take tax breaks for hiring a great variety of workers. Now you can claim the credit for certain unemployed veterans and “disconnected youths.”
Strategy: Request certification of those workers by Aug. 17. The IRS just established this as an extended cutoff date for making requests to state agencies. (IRS Notice 2009-28)
To secure the tax break, employers are instructed to use newly revised Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. Find it at www.irs.gov/pub/irs-pdf/f8850.pdf.
The law: Under prior law, you could claim the WOTC by hiring a worker from one of several “target” groups. The new law adds the two new categories for 2009 and 2010.
For this purpose, an “unemployed veteran” is defined as someone who has been discharged or released from the military during the five years preceding the hiring date and who has received unemployment benefits for at least four weeks during the one-year period ending on the hiring date.
A “disconnected youth” is a person who is between the ages of 16 and 24 on the hiring date and has not been regularly employed or is attending school and meets other requirements.
Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. However, under a special rule, a business has until Aug. 17, 2009, to file the form for unemployed veterans and disconnected youths who begin work after Dec. 31, 2008, and before July 17, 2009.
Tip: You must reduce the regular deduction for wages paid to WOTC workers.
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