WORK OPPORTUNITY TAX CREDIT

WORK OPPORTUNITY TAX CREDIT http://www.doleta.gov/business/Incentives/opptax/ Federal Tax Credits for Employers Who qualifies an employer for the WOTC? The consolidated WOTC applies only to new employees who begin work on or after January 1, 2007. The new employee may not have worked for the hiring employer anytime in the past and may not be a relative or dependent of the employer. A new employee may be certified as a member of a targeted group by meeting the criteria described in any of the nine targeted groups listed below: • (Group1) Short-term assistance recipient: A member of a family that is receiving or recently received Temporary Assistance to Needy Families (TANF) for any 9-month period during the18-month period ending on the hiring date. • (Group 2) Qualified veteran: A veteran who is a member of a family that is receiving or recently received Food Stamps for a 3-month period during the15-month period ending on the date of hire. For the newly established subgroup disabled veteran, a veteran who is entitled to compensation for a service-connected disability and has a hiring date not more than one year after discharge or release from active duty, or has been unemployed for a period or periods totaling at least six months during the one-year period ending on the date of hire. • (Group 3) Qualified ex-felon: An individual convicted of a felony and who has a hire date not more than one year after the last date of conviction or release from a correctional facility. • (Group 4) Designated community residents (DCRs): Formerly designated as the High-Risk Youth target group. An individual who is age 18 but not 40 years old on the hire date and who lives within an Empowerment Zone (EZ), an Enterprise Community (EC) or a Rural Renewal County. • (Group 5) Vocational rehabilitation referral: An individual with a physical or mental disability who completed or is completing rehabilitation services from a State agency, an Employment Network, or the Department of Veterans Affairs, with a written work plan. Ticket to Work holders are included. • (Group 6) Summer youth employee: Youth 16 and 17 years of age who reside in an Empowerment Zone . • (Group 7) Food stamp recipient: An individual 18 years of age but not yet 40 and a member of a family that is receiving or recently received Food Stamps during the last six months prior to date of hire. • (Group 8) Supplemental Security Income (SSI) recipient: An individual who has received SSI benefits within 60 days prior to the date of hire. • (Group 9) Long-term family assistance (LTFA) recipient: A member of a family that is receiving or recently received TANF payments for 18 consecutive months ending on the date of hire; OR received these payments for at least 18 months after August 1997 and has a hiring date not more than two years after the end of this 18-month period; OR stopped being eligible for these payments after August 1997 because of Federal or state law and has a hiring date not more than two years after eligibility expired. What is the Work Opportunity Tax Credit? The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to all private sector businesses. It was designed as an incentive to employers to hire individuals in certain targeted groups which consistently experience high rates of unemployment due to a variety of employment barriers. WOTC is a tool for job seekers in these targeted groups to use to help them obtain gainful employment so that they may acquire the skills and experience needed to be eligible for better, higher paying job opportunities. Legislative Updates On May 25, 2007, the President signed into law the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28). The legislation modifies the WOTC provisions in the Tax Relief and Health Care Act of 2006, signed into law on December 20, 2006, and extends the tax credit through August 31, 2011. The Tax Relief and Health Care Act of 2006 (P.L. 109-432) merged the Welfare-to-Work Tax Credit (WtWTC) into the WOTC effective with job start dates beginning January 1, 2007. The significant changes which apply to new hires who begin work for an employer after December 31, 2006 are: • Eliminates the earnings test for ex-felons • Increases maximum age for food stamp recipients to 39 years • Increases the filing deadline for certification requests to 28 calendar days The Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) modifications which apply to new hires who begin work for an employer after May 25, 2007, are: • Renames the High-Risk Youth target group to Designated Community Residents, increases maximum age to 39, and expands this group to include certain rural counties • Establishes a new disabled veteran subgroup • Clarifies the individual work plan under Vocational Rehabilitation Referrals • Extends the WOTC for 44 months through August 31, 2011 To receive a certification that allows an employer to claim the tax credit, the employer must submit: • IRS Form 8850 (Pre-Screening Notice and Certification Request) and Instructions o New hire completes, signs, and dates front of the form by date job is offered o Employer or employer’s representative completes, signs, and dates the back (page 2) of the form o Signatures must be original o NO 8850 with photocopied signatures and NO faxed 8850 will be certified • ETA Form 9061 (Individual Characteristics Form) o Employer or employer’s representative and/or new hire completes, signs and dates the one-sided form o If new hire has been conditionally certified as belonging to a target group, the employer completes the bottom portion of the ETA Form 9062, signs and dates it. This form takes the place of the 9061. o Forms are available on the Web Site Listed above, along with the list of State Coordinators. The signed original 8850 form must be postmarked by the U.S. Postal Service within 28 calendar days following the job start date. Week-ends and holidays are taken into account when determining the timeliness of the submittal. Applications filed late will be denied. Comments to Employers • Please use the up-to-date version of the 8850 form (Rev. 6/07). The current 9061 form should be used until the new one is published. The employer should indicate on the 9061 any amended target group(s) for which the employer is requesting the WOTC. • The WOTC Unit will verify employee eligibility for target group(s) checked on the 8850 and 9061 forms and will notify the employer to provide specific documentation only when needed. For target groups 4 and 6 only, employer is asked to send proof of age and proof of residence of employee at time of hire. • To claim the tax credit when filing a federal business tax return, use IRS form 5884. Important Facts • Any size for-profit employer may apply for the WOTC • No limit to the number of new hires for the WOTC in any calendar year • No relatives or dependents • No self-employment • Temporary, seasonal, part-time and full-time work applies • Federal OJT wages do not count toward qualified wages, but hours of work do • Credit begins on the employment start date, including any breaks in employment during the employee's first year of employment (2nd year for LTFA certified employee) • Employer may carry back or carry forward unused credits