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Payroll Today

Don’t leave $$$ on the table: Claim the WOTC

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Alice Gilman

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in Payroll Today

The Work Opportunity Tax Credit (WOTC) allows you to take a 40% tax credit on your corporate return for the first $6,000 in wages paid when you hire employees who are members of certain disadvantaged groups. Maximum credit: $2,400 per employee.

The WOTC expired at the end of 2014 and Congress reinstated it last December, retroactive to Jan. 1, 2015. Before you can take the credit, however, you have to jump through some hoops. The IRS has now provided relief to employers that hired WOTC-qualified employees during 2015.

The credit has also been expanded to include a new targeted group—the long-term unemployed whom you hire, beginning this year. These are individuals who have been unemployed for at least 27 weeks and who have received unemployment benefits.

WOTC details

Although the rules vary slightly among the various groups, the WOTC is available if you hire employees from specific disadvantaged, or targeted, groups, including:

  • Qualified recipients of Temporary Assistance for Needy Families
  • Qualified veterans
  • Qualified ex-felons
  • Qualified residents of designated communities
  • Vocational rehabilitation referrals
  • Qualified summer youth
  • Qualified food stamp recipients
  • Qualified recipients of supplemental security income benefits
  • Qualified long-term family assistance recipients
  • Qualified long-term unemployed.

You must obtain certification from your state employment security agency (SESA) that employees are members of a targeted group by their first day of work. Alternatively, you must complete a prescreening notice, Form 8850, by the day you offer employees a job and submit the form to the SESA not later than 28 days after they begin work. You must also submit a Department of Labor Employment and Training Administration (ETA) Form 9061 (Individual Characteristics Form) or Form 9062 (Conditional Certification) to the SESA.

Transition relief

Since you couldn’t complete the appropriate paperwork for employees hired last year, the IRS has provided transition relief:

  • For employees hired on or after Jan. 1, 2015, and before May 31, 2016, from every targeted group, except the long-term unemployed, you must file Form 8850 by June 29, 2016
  • For employees hired on or after Jan. 1, 2016, and before May 31, 2016, including the long-term unemployed, you must file Form 8850 by June 29, 2016.

The regular certification rules apply to new hires from targeted groups who are hired on or after June 1, 2016.

The WOTC is scheduled to expire again on Dec. 31, 2019.

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