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Work Opportunity Tax Credit

What You Need to Know to Save Up to $2,400
per Employee on Federal Taxes

Click here for the latest legislative information about the WOTC program!

 

What is the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit (WOTC) is a tax credit offered to employers as an incentive to hire individuals who are members of targeted groups which have traditionally faced significant barriers to employment.
The Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) was signed into law on May 25, 2007. This legislation extends the WOTC program for a 44-month period through August 31, 2011; and makes the program's authority retroactive to its expiration date as well as merging the Welfare to Work program in with the WOTC Program.

 

a.       Title IV-A Recipient - a member of a family that has received assistance from Aid to Dependent Children (AFDC) or its successor program Temporary Assistance to Needy Families (TANF) for any 9 months within the last 18 months.

b.      Veteran/Disabled Veteran/Unemployed Veteran - a veteran and member of a family that received food stamps for at least 3 of the 15 months preceding the date of hire, or a disabled veteran who is entitled to a service-connected disability and has a hiring date which is not more than one year after having been discharged or released from active duty in the Armed Forces of the United States or has aggregate periods of unemployment during the one-year period ending on the hiring date that equals or exceeds six months.

c.       Ex-Felon - a person convicted of a felony AND within the past year was either convicted or released from prison. (the requirement to meet the Lower Living Income standard has been removed)

d.      Designated Community Resident – is an individual who attained age 18 but not yet 40 on the hiring date and his/her principal place of abode (residing) within an Enterprise Zone, Empowerment Community or a Rural Renewal County.  

e.       Vocational Rehabilitation Recipient - a person with a disability who has received or is receiving vocational rehabilitation from a rehabilitation agency approved by the state or the Department of Veterans Affairs. (Drug/alcohol rehab does not qualify.) Also including a Ticket to Work holder who has an Individual Work Plan with an employment network agency.

f.        Summer Youth/Disconnected Youth - a person a least age 16 but not 18 on the hiring date and who has a principal residence in an Empowerment Community or Enterprise Zone. (During 90-day summer working period.)

g.       Food Stamp Recipient - a person who is at least 18 but under age 40, AND is a member of a family that has received food stamps for the last 6 months; OR received food stamps for at least 3 of the last 5 months, AND is no longer eligible to receive them.

h.       SSI Recipient - a person receiving Supplemental Security Income (SSI) benefits for any month during the 60 days preceding the date of hire.

i.         Long-term Family Assistance Recipients – a qualified long-term family assistance recipients is an individual certified by a designated local agency as being: (1) a member of a family that has received family assistance for at least 18 consecutive months ending on the hiring date; (2) a member of a family that has received such family assistance for a total of at least 18 months (whether or not consecutive) after August 5, 1997 (the date of enactment of the welfare-to-work tax credit) if the individual is hired within two years after the date that the 18 month total is reached; or (3) a member of a family who is no longer eligible for family assistance because of either Federal or State time limits, if the individual is hired with two years after the Federal or State time limits made the family ineligible for family assistance.

 

How long must the employee work in order for the employer to claim the credit?
Under The Taxpayer Relief Act of 1997 (P.L. 105-34), the WOTC utilizes a two-tier tax credit format. Employers can claim 25% of the qualified first-year wages up to $6,000 for employees working, at least 120 hours but less than 400. For employees working a least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first-year wages up to $6,000
. This allows a maximum credit of $2,400. The Long Term Family Assistance recipient is calculated at 40% of the qualified first year wages up to $10,000 and 50% of qualified second year wages, maximum savings $9,000. For the Summer Youth target group, the credit is calculated at a rate of 25% of the qualified first-year wages up to $3,000. The disabled veteran only, the maximum qualifying wages are up to $12,000.

When an employer believes that a prospective employee meets the qualifications for WOTC, after an offer of employment has been made and the employee has performed their first day of work, the following simple steps should be taken:

1.      Complete the employer section of the IRS FORM 8850, "Work Opportunity Credit Pre-Screening Notice and Certification Request" and have the jobseeker complete the first page. Make certain that the applicant signs the form.

Signatures must be original.

 

2.      Complete either the Department of Labor

ETA FORM 9061, "Individual Characteristics Form" if the new employee has not been conditionally certified. This form should be accompanied by documentation validating the employee’s eligibility, or

ETA FORM 9062, "Conditional Certification Form" if provided to the jobseeker by a participating agency*

3.      Mail the completed IRS 8850 and ETA 9062 or ETA 9061 to your state/local WOTC coordinator within 28 days after employee’s first day at work and mail them to the address indicated below. The postmark will be used to establish the date of submission. Unfortunately, the IRS has clearly stated that the employment service may not accept a faxed copy of the Form 8850.

 

How may I obtain further information?

To obtain forms and instructions, click on the links.

Letter of Introduction to Employers about WOTC

Letter of Introduction to Employers about WOTC (fillable)   

Disconnected Youth Self-Attestation Form

IRS Form 8850 , the Work Opportunity Tax Credits Pre-Screening Notice and Certification Request

You may also download from http://www.irs.ustreas.gov/ or call 1-800-829-1040.

ETA Form 9061, the WOTC "Individual Characteristics Form"

ETA FORM 9062, "Conditional Certification Form"

Work Opportunity Tax Credit Brochure

Brochures with directories of the State and Regional Coordinators may be obtained by calling the number(s) indicated below. You can also get this form and materials by visiting http://www.doleta.gov/business/Incentives/opptax/

 

Whom should I call for further information?

Debra Roseburr, Program Manager - (405) 557-7128

Oklahoma Employment Security Commission
WOTC Unit
PO Box 52003
Oklahoma City, OK 73152-2003