Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) Program is designed to assist individuals from certain targeted groups who have consistently faced significant employment barriers with re/entering the labor force. The program does so by providing federal tax credit incentives to employers for hiring these individuals.
WOTC helps targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers simultaneously reduce their income tax liability.
Work Opportunity Tax Credit
The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) retroactively allows eligible employers to claim the WOTC for all targeted group employee categories that were in effect prior to the enactment of the PATH Act, if the individual began or begins work for the employer after December 31, 2014 and before January 1, 2020. For tax-exempt employers, the PATH Act retroactively allows them to claim the WOTC for qualified veterans who begin work for the employer after December 31, 2014 and before January 1, 2020. (The maximum tax credit ranges from $1,200 to $9,600, depending on the qualified targeted group hired.)
The PATH Act also added a new targeted group category to include qualified long-term unemployment recipients.
A qualified long-term unemployment recipient is any individual who is in a period of unemployment on the day before beginning work for the employer, or, if earlier, the day the individual completes Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. A period of unemployment is defined as being
- no less than 27 weeks and
- includes a period (which may be less than 27 weeks) in which the individual received unemployment compensation under State or Federal law.
As the PATH Act extended the WOTC retroactively for 2015, members of targeted groups and employers need additional time to submit Form 8850. Notice 2016-22 provides employers that hire members of targeted groups additional time beyond the 28-day deadline for submitting Form 8850 to Designated Local Agencies (DLAs).
Below are specific items to be aware of concerning the Notice and submitting the new deadlines.
An employer will be considered having timely submitted Form 8850 for targeted groups (other than qualified long-term unemployment recipients) to the appropriate DLA if the employer submits the completed Form 8850 on or after January 1, 2015 and on or before May 31, 2016.
Additional time beyond the 28-day deadline has been allotted for such employers submitting Form 8850 to the appropriate DLA. An employer will be considered having timely submitted Form 8850 for this new targeted group to the appropriate DLA if the employer submits the completed Form 8850 no later than June 29, 2016.
Yes. A timely request for certification does not eliminate the need for the employer to receive a certification before claiming the credit.
Services Provided with WOTC
- Taxable employers claim the WOTC as a general business credit on Form 3800 against their income tax liability.
- Qualified tax-exempt organizations claim the credit on Form 5884-C as a credit against the employer’s share of Social Security tax.
An employer must hire an employee who is certified as being a member of a WOTC qualified targeted group. Then the State WOTC Coordinator for the Tennessee Department of Labor and Workforce Development must certify the job applicant is a member of a WOTC qualified targeted group. Lastly, an employer must obtain certification that the individual is a member of a WOTC qualified targeted group in order to claim the credit.
This information is provided as a general program guide only and is subject to change without notice from the Tennessee Department of Labor and Workforce Development as the legislative authority is amended. The U.S. Department of Treasury, through the Internal Revenue Service (IRS), has administrative responsibility for the tax provisions of the credit (Section 51, of the Internal Revenue Code).
How to Apply for the Tax Credit
All employers must complete the IRS Form 8850 (Instructions) and USDOL Form ETA 9061 for new hires. Employers will be the responsible legal forms holder. Once the employer obtains the 8850 and 9061 information, please submit the info via our online application system within 28 days of the employee start date. You may access the online application on the WOTC Portal.
Additional inquiries may be directed to the WOTC unit at 844-216-8495 or WOTC.INFO@tn.gov.
|U.S. Department of Labor WOTC