The Work Opportunity Tax Credit (WOTC) is a federal tax credit program offering significant incentives for employers who hire and retain individuals from specific target groups that have in the past experienced difficulty in securing employment, such as long-term welfare recipients and ex-felons.
WOTC allows employers to claim a maximum tax credit of $2,400 on wages paid over the first year of employment and a maximum tax credit up to $9,000 for wages paid in the first two years of employment. The tax credits or any unused portion of the credits can be carried back one year or forward 20 years from the year in which the employer claims the credit. Section 309 of the American Taxpayer Relief Act of 2012 (the Act), Pub. L. No. 112-240, enacted on January 3, 2013, and transition relief for employers claiming the Work Opportunity Tax Credit (the WOTC) under §§ 51 and 3111(e) of the Internal Revenue Code (the Code), as extended by the Act. Section 309 of the Act amended § 51 to extend the WOTC through December 31, 2013, for taxable employers and for qualified tax-exempt organizations.
During the last program year from July 1, 2012 through June 30, 2013, 6,000 Work Opportunity Tax Credit (WOTC) applications were certified for a tax credit resulting in an estimated 7.2 million in tax credits to West Virginia employers.
- Receive tax credits for hiring individuals from targeted groups yet still make their own hiring decisions.
- Reduce their federal tax liability by as much as $2,400 per new hire during their first year of employment.
- Help those most in need to become economically self-sufficient.
- Hire as many qualified employees as their payroll will allow.
- Reduce their recruitment and training costs.
- Claim the tax credit with minimal paperwork.
- Provide valuable on-the-job experiences to qualified job seekers.
How does an employer apply for the tax credit?
Employers must complete two forms: 1) Internal Revenue Service (IRS) 8850--Prescreening Notice and Certification Request, and 2) Employment and Training Administration (ETA) 9061--Individual Characteristics Form. Employers must provide required documentation and original signatures. Employers must meet the filing deadline--applications must be postmarked within 28 days of start work date.
How can an employer get the required forms?
Both the IRS 8850 and the Department of Labor ETA 9061 may be downloaded from the WOTC homepage: http://www.doleta.gov/business/incentives/opptax/
Employers may call the WOTC state office at (304) 558-5050 to request forms.
What job seekers are in the WOTC target groups?
There are 11 target groups that include qualified job seekers in the following categories
- Recipients of Temporary Assistance for Needy Families (TANF) - An individual who received or is a member of a family that has received TANF assistance for any nine months during the 18-month period ending on the hiring date.
- Unemployed Veterans -
- A veteran who served in active duty for at least 180 days and is a member of a family that received food stamps for at least a three-month period during the 12-month period ending on the start work date.
- A veteran who is entitled to compensation for a service-connected disability and discharged or released from active duty within the year prior to the hire date.
- A veteran who served in active duty for at least 180 days and is entitled to compensation for a service-connected disability and unemployed for a period of 26-weeks during the 12-month period prior to the hire date.
- A veteran who served in active duty for at least 180 days and unemployed for a period of 26-weeks during the 12-month period prior to the hire date.
- A veteran who served in active duty for at least 180 days and unemployed for a period of 4-weeks during the 12-month period prior to the hire date.prior to 60 days of the hire date.
- Disabled veterans who are entitled to compensation for a service-connected disability AND have a hiring date which is not more than one year after having been discharged or released from active duty in the US Armed Forces
- Ex-Felons - An individual who has been convicted of a felony and has a hiring date within one year after conviction or release from prison.
- Designated Community Residents - Any person who is at least 18, but not yet 40 and resides in the Huntington, WV Empowerment Zone, the Upper Kanawha Valley Enterprise Community, or the Rural Renewal Counties of Calhoun, Gilmer, Logan, McDowell, Mercer, Mingo, Summers, Tucker, Webster, Wetzel, and Wyoming in West Virginia. To determine whether an address is in an Empowerment Zone or Enterprise Community, visit http://egis.hud.gov/egis/cpd/rcezec/ezec_open.htm and enter the address.
- Vocational Rehabilitation Referrals-Any person having a physical or mental disability which, for that individual, constitutes or results in a substantial handicap to employment, and who was referred to the employer upon completing or while receiving rehabilitative services from a State-certified agency, an Employer Network, or the U.S. Department of Veterans Affairs.
- Summer Youth Employees - Any person hired between May 1 and September 15, who is 16-17 years old, and resides within an Empowerment Zone, Enterprise Community, or Rural Renewal County. \
- Food Stamps Recipients - Any person 18 years of age but not yet 40 who is a member of a family that received food stamps for the last six months or received food stamps for three months out of the last five months but is no longer eligible to receive them and has no dependents.
- Supplemental Security Income (SSI) Recipients - An individual who received SSI benefits for any month ending within 60 days prior to the hire date.
- Long-Term/Family Assistance Recipients- Individuals must be Long-Term Family Assistance recipients or a member of a family who has received LTFAR. Recipients include those:
- Who received Temporary Assistance to Needy Families (TANF), for at least 18 consecutive months ending on the date of hire
- Whose TANF eligibility expired under Federal or State law after August 5,1997, and are hired within two years after this eligibility expired
- Who received TANF for a total of at least 18 months after August 5, 1997, and are hired within two years after the 18-month period is reached.
Many of these same Target Groups also qualify for the FREE Federal Bonding Program. The bonding program offers FREE fidelity bonding insurance protection to any employer for any job. It offers $5,000 in indemnification against acts of employee dishonesty by the bonded for a period of 6 months.
For more information, email the WOTC State Office or call 304-558-5050.