Work Opportunity Tax Credit

Posted by BAS - 18 August, 2016

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The Work Opportunity Tax Credit (WOTC) is a federal tax credit employers may use if they hire individuals from certain groups who have faced significant barriers to employment.  The maximum tax credit ranges from $1,200 to $9,600, depending on the employee hired.  The WOTC is intended to increase workplace diversity and access to jobs.  

Employers who hire eligible employees from the following groups may be eligible to take the WOTC.

  • Unemployed veterans (including disabled veterans)
  • Temporary assistance for needy families (TANF) recipients
  • Food stamp (SNAP) recipients
  • Designated community residents (living in empowerment zones or rural renewal counties)
  • Vocational rehabilitation referred individuals
  • Ex-felons
  • Supplemental social security income recipients
  • Summer youth employees (living in empowerment zones).

There is no limit on the number of individuals an employer can hire to qualify for the credit, however the new hires must work for the company for at least 120 hours to claim the credit.  The WOTC is in effect through December 31, 2019.

If an employer wants to claim the WOTC, the employer must complete IRS Form 8850 when or before an offer of employment is made to an eligible worker. Employment and Training Administration Forms 9061/9062 also must to be completed and sent to the state department of labor within 28 days of the start date of the new hire.  After the employer receives a certified application from the state workforce agency, an IRS Form 5884/5884-c will need to be filed with the IRS to claim the tax credit.

 


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