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Tax Credits

 

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit incentive that Congress provides to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. The main objective of this program is to enable the targeted employees to gradually move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers are compensated by being able to reduce their federal income tax liability. WOTC joins other workforce programs that help incentivize workplace diversity and facilitate access to good jobs for American workers.

Current WOTC Target Groups

A veteran who is:

  • A member of a family that received SNAP benefits (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date.
  • Entitled to compensation for a service-connected disability:
  • Hired within 1 year of discharge or release from activity duty
  • Unemployed at least 6 months in the year ending on the hiring date
  • At least 4 weeks
  • At least 6 months
  • Unemployed:

Please note that to be considered a veteran eligible for WOTC, an individual must meet these two standards:

  • Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability
  • Not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date

To receive certification that a new Veteran employee qualifies the employer for WOTC, the employer must:

  1. Complete page one of IRS Form 8850 (pdf) by the day the job offer is made.
  2. Complete page 2 of IRS IRS Form 8850 (pdf) after the individual is hired.
  3. Complete either the one page ETA Form 9061 (pdf) or Form 9062 as appropriate.For example:
    • If the new employee has already been conditionally certified as belonging to a WOTC target group by a state workforce agency (SWA) or participating agency, complete the bottom part of ETA Form 9062, sign and date it, or
    • If the new employee has not been conditionally certified, the employer and the new employee must complete, sign and date ETA Form 9061.
  4. Mail the completed and signed English versions of IRS and ETA forms to the employer’s state workforce agency (SWA)
    • For hires made on or after November 22, 2011, and before May 22, 2012, employers have until June 19, 2012, to submit the forms.
    • For hires made after May 22, 2012, employers must submit the forms within 28 calendar days after the employee’s employment-start date. (To find the address of the SWA in your state consult the Directory of State Coordinators).

For the Veteran-target group and its new categories, the Work Opportunity Tax Credit can now be as much as:

  • $2,400 for each Veteran new hire receiving SNAP benefits,
  • $2,400 for each new veteran unemployed for at least 4 weeks,
  • $4,800 for each disabled veteran new hire released one year after active duty,
  • $5,600 for each new veteran unemployed for at least 6 months, or
  • $9,600 for each new disabled veteran employed for 6 months.

WOTC Target Groups on Hiatus

There is a reasonable expectation that the non-veteran groups will be reauthorized at some point in the future based on prior similar legislative history and Congressional action. Consistent with Congressional past practice to extend the program retroactive to its expiration date, the Department of Labor has issued guidance instructing employers and their representatives to continue filing their certification requests for new hires during the authorization lapse.

Long-term Temporary Assistance for Needy Families (TANF) Recipient:

A member of a family that meets one of the following circumstances:

  • Received TANF benefits for at least 18 consecutive months ending on the hiring date.
  • Received TANF benefits for at least 18 consecutive or non-consecutive months after August 5, 1997, and has a hiring date that is not more than 2 years after the end of the earliest 18-month period after August 5, 1997.
  • Stopped being eligible for TANF payments during the past 2 years because a Federal or state law limited the maximum time those payments could be made.

Short-term TANF Recipient:

  • A member of a family that received TANF benefits for any 9-month period during the 18-month period ending on the hiring date.

SNAP (food stamp) Recipient:

  • An 18-39 year old member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for the 6 months ending of the hiring date or received SNAP benefits for at least 3 of the 5 months ending on the hiring date.

Vocational Rehabilitation Referral:

  • An individual with a disability who completed or is completing rehabilitative services from a state-certified agency, an Employment Network under the Ticket to Work program, or the U.S. Department of Veteran Affairs.

Ex-offender:

  • An individual who has been convicted of a felony and has a hiring date that is not more than 1 year after the conviction or release from prison.

Supplemental Security Income (SSI) recipient:

  • A recipient of SSI benefits for any month ending during the past 60-day period ending on the hire date.