WOTC Work Opportunities Tax Credit

							WOTC
Work Opportunities Tax
Credit
What it is, What it Isn’t and How
to Make it Work for Your
Employer Partners



 December 2004
   Craig H. Respess, M.S.
  Employment Services Director
North Carolina Division of Services
           for the Blind
What it is….
      Some years ago, federal legislation
allowed for Targeted Jobs Tax Credit (TJTC)
which provided for possible tax credits for
employers hiring people with disabilities.
Unfortunately, TJTC authorization was time-
limited, at times not re-authorized or in other
situations was allowed to lapse. In 1996,
Work Opportunities Tax Credit (WOTC),
authorized by the Small Business Job
Protection Act of 1996, replaced TJTC.
December 2004
 WOTC provides tax credit for
 employers hiring individuals
 from certain targeted groups:
low income individuals
former AFDC recipients
veterans
ex-felons
food stamp recipients
summer youth employees

December 2004
Supplemental Security Income
 recipients (SSI)
VOCATIONAL REHABILITATION
 REFERRALS




December 2004
Total amount of WOTC
taken on corporate income
tax returns by business and
industry in 1996 totaled
almost $7 million. There
were 370,000 certifications
issued in FFY 2000.
Statistics of Income Report, IRS, 1996 (pub. 1999)

December 2004
Dollar$ and $en$e
 • With the Credit, employers may take up to
 40% of the first $6,000 in first-year wages per
 qualified employee ($2,400) for employees
 who work at least 400 hours during the tax
 year.
 • Employers can claim a partial credit of 25%
 of wages paid for qualified employees who
 work at least 120 hours but less than 400 hours
 during a one-year period


December 2004
What it isn’t ….
      While WOTC is often viewed as
an incentive to encourage employers to
hire people with disabilities ….




December 2004
December 2004
            Schmidt-Davis & Hayward, RSA Longitudinal Study, RTI International, 2003
 Accordingly, WOTC should not
 be viewed as a primary
 marketing tool in employer
 development, job development
 and consumer placement, but
 $2,400 worth of “icing on the
 cake” for employer partners.




December 2004
 How to Make it Work for Our
 Employer Partners
   First, the Official Process:
   1. Employer determines likely eligibility by including the
   WOTC Pre-Screening Notice as part of the application process
   2. On or before the day employment if offered, the Notice must
   be signed by the employer and employee. The Notice is mailed
   to the State Employment Security Agency (SESA) within 21-
   days after work begins
   3. Based on information from the employee, the employer
   documents eligibility and submits documentation to the SESA
   4. The SESA certifies that the individual is eligible for the
   WOTC and notifies the employer in writing for purposes of
   filing the tax credit
                VR and a Better Way
December 2004
How to Make it Work (cont.)
 Skip the first 3 steps!
While the SESA is the certifying authority for the tax
credit, VR (and only VR) can “conditionally certify”
any individual it refers for employment. This conditional
certification will guarantee certification by the SESA as
long as the appropriate documentation is dated on the
first working day and the documents are mailed within
the 21 days.




December 2004
  VR Staff
  The appropriate staff member can complete the
  Conditional Certification (ETA 9062) and the top
  portion of the Pre-screening Notice (IRS-8850) in
  advance. The staff member can provide these to the
  employer or give them to the consumer if the
  consumer is conducting his or her own job search or
  interviewing process. The employer must have these
  at the hire date. These need to be original copies
  The Employer
  The employer only has to complete the IRS 8850 and
  send it, with the provided ETA 9062, to the SESA
  within 21 days of hire.
                         A little easier for the employer !

December 2004
Where to get the Forms
The RSA Region V CRP-RCEP has posted links on
its teleconference website for all forms needed to
access WOTC for employers at:


http://www.ed.uiuc.edu/illinoisrcep/activities/teleconf.htm



Those web addresses follow:




December 2004
Where to get the Forms
IRS Form 8850 can be located at
      http://www.irs.gov/pub/irs-pdf/f8850.pdf

     For staff convenience, a fill in form is located at
       http://www.irs.gov/pub/irs-fill/f8850.pdf

     Instructions for completion are located at

       http://www.irs.gov/pub/irs-pdf/i8850.pdf



December 2004
Where to Get Forms
  Form ETA-9062 is more difficult to locate:

  http://www.uses.doleta.gov/pdf/Appendix_II/Appe
  ndix_II__2_ETA_9062.pdf

  Should an employer request certification
  without the involvement of VR, he cannot use
  ETA-9062 (condition certification) but must
  request certification from the SESA on ETA-
  9061, located at:

  http://www.uses.doleta.gov/pdf/Appendix_II/Appen
  dix_II__1_ETA_9061.pdf
December 2004
Other Business Tax Credits
  Small Business Tax Credits
         IRS Code, Section 190, “Expenditures to
  Remove Architectural Barriers and Transportation
  Barriers to the Handicapped and Elderly,” enables
  small businesses to take an annual tax credit for
  accessibility accommodations.




December 2004
 IRS Code Section 190
 What is a small business?
         In the year for which the tax credit is claimed,
 the business earned $1 million or less in gross receipts
 or had 30 or fewer full-time employees.
 What expenses are covered?
         Sign language interpreters or readers for
 employees or customers with hearing or visual
 impairments, purchase of adaptive/modification
 equipment, publishing costs of materials in alternative
 formats, removal of architectural barriers, or other
 supports services (employer paid job coach or use of a
 coworker to provide support to employee with
 disability)
December 2004
  IRS Code, Section 190
  Dollars & $en$e
         Business can claim credit for 50% of expenditures
  over $250, not to exceed $10,250 on IRS Form 8826.


  The tax credit does not apply to new construction
  costs or building modifications being if the building
  was placed into service after November 6, 1990.




December 2004
  Architectural & Transportation Tax Deduction
         IRS Code, Section 44, “Expenditures to
  Provide Access to Disabled Individuals,” (Disabled
  Access Tax Credit), provides for tax deductions for
  accessibility related costs regardless of the size of the
  business. Some covered expenditures include:
  • providing accessible parking places, ramps, curb
  cuts
  • making telephones, water fountains restrooms
  accessible
  • making walkways at least 24 inches wide
  • providing accessible entrances to buildings

December 2004
IRS CODE, SECTION 44
Dollars & $en$e
        The IRS allows a deduction of up to $15,000 per
year for architectural and transportation barrier removal
expenses.

  Deductions cannot be used for new construction,
  completion of renovations being made to a
  facility or public transportation vehicle or for
  normal replacement of depreciable property

  Business cannot take a deduction (under code 44)
  and a credit (under code 190) for the same
  expenditure)

December 2004
                                   Employment Services


                       A Tax Break. Compliments of the IRS.
                                    No Kidding!
                In addition to other benefits like screened employees, customized consultation and
                follow up after the hire, you can be one of hundreds of employers who benefit from a
                tax savings when you employ someone referred by the NC Division of Services for
                the Blind. Here is a summary of the tax benefits available to our Employer
                Partners.

                WORK OPPORTUNITY TAX CREDIT (WOTC)
                If you hire someone referred by the DSB, you can receive a tax credit of up to 40% of
                the first $6,000 of your new employee’s first year wages. Our referrals are in one of
                eight such categories of individuals covered by the WOTC. However, we, with the
                general Vocational Rehabilitation agency, are the only entities that can conditionally
                certify your tax credit. This offers a guarantee of certification by the Employment
                Security Commission. All you have to do is complete the paperwork we provide, date
                it with your employee’s first working day, and mail to the ESC before the 21st working
                day. That’s it!

                DISABLED ACCESS TAX CREDIT
                When you hire a referral from the DSB, you get an employee who is prescreened and
                ready to go to work. Sometimes your new hire might have a disability that might
                require a (usually) minimal investment to help make the work tasks accessible. You
                might be able to offset such costs with a tax credit of up to 50% of eligible expenses.
                If your business has 30 or fewer employees or if it earned $1,000,000 or less in gross
                receipts the previous tax year, you can earn the credit for costs that exceed $250 but
                do not exceed $10,250. These costs might be sign language interpreters, printed
                materials in alternate format, adaptive equipment, job-coaching by another employee,
                etc. Also, the credit can apply to architectural barrier removal. See below.

                WELFARE TO WORK TAX CREDIT
                Hired an employee who has received welfare benefits (TANF or AFDC) for 18 months
                or more prior to hire? You might be eligible for the Welfare to Work Tax Credit. The
                Credit can be as much as $8,500 for each new qualifying employee. Your credit can
                be up to 35% of the first $10,000 of your employee’s first year wages and up to 50%
                of the first $10,000 the second year.

                ARCHITECTURAL AND TRANNSPORTATION BARRIER REMOVAL DEDUCTION
                You can deduct up to $15,000 for making a facility more usable by people with
                disabilities. This might include alterations to buildings, structures, equipment, road,
                walkways, parking lots, etc. Some expenditures could qualify for this deduction AND
                the Disabled Access Tax Credit (see above).

                While both tax credit and deductions can be used in any year in which there are new expenses, any
                portion of a cost that exceeds the maximum in a given year may not count toward a credit or
                deduction in the next. However, if your credit exceeds the amount of taxes you owe, the unused
                portion may carry over to the following year.

                   For More Information or filing assistance, contact our District Office nearest you!
                Asheville (800) 422-1881 <> Charlotte (800) 422-1895 <> Fayetteville (800) 422-1897
December 2004   Greenville (800) 422-1877 <> Raleigh (800) 422-1871 <> Wilmington (800) 422-1884
                                           Winston-Salem (800) 422-0373
     Craig H. Respess, M.S.


     Employment Services Director
     NC Division of Services for the Blind
     309 Ashe Avenue
     2601 Mail Service Center
     Raleigh, North Carolina 27699-2601
     (919) 733-9822
     craig.respess@ncmail.net


December 2004