What is the Work Opportunity (WOTC) Tax Credit?
The WOTC is an income tax credit incentive provided to employers when they hire from certain target groups of job seekers who face employment barriers. The credit can be as large as $9,600 per qualified applicant.
The WOTC tax credit was part of the Tax Increase Prevention Act, which was signed into law in December 2014. The Tax Increase Prevention Act extended many federal income tax credits, including the WOTC.
To be eligible for the credit, a new employee has to be certified as a member of a targeted group by a State Employment Security Agency (SESA).
The employer can either get the certification by the day the prospective employee begins work or complete a pre-screening notice (using Form 8850) for the employee by the day employment is offered. The pre-screening notice must be submitted to the SESA within 28 days after the employee begins work. However, due to the extension of the WOTC not being approved until December, timely compliance with this requirement was impossible for most 2014 new hires.
There’s Still Time to Certify Qualified Employees.
The extended deadline for submitting Form 8850 is April 30. Notice 2015-13 waves the 28-day deadline for submitting the application for qualify employees hired in 2014. This provides a unique opportunity for an employer to look back over the past year and determine if any new hires are
part of a target group and claim the WOTC.
- Employers may now submit WOTC applications for employees hired in 2014
- Employers who may have missed the 28-day deadline for 8850 may now reconsider and submit all applications for qualified 2014 new hires
- Submit all applications on or before April 30, 2015
Important note: A timely request for certification does not eliminate the need for the employer to receive a certification before claiming the credit. Employers may need to extend their 2014 federal income tax return in order to receive the certifications and claim the WOTC.
In light of the current extension and subsequent pending expiration of the WOTC on December 31, 2014, employers may want to consider the actions that would enable them to qualify for the WOTC in the event that Congress retroactively extends the WOTC for 2015.
Employers should consider the following:
- Continued screening of candidates and the completion of page 1 of Form 8850 on or before the day employment is offered
- Completion of page 2 of Form 8850 after a qualified individual is hired
- Completion of Form 9061
- Submission of the completed and signed form to the applicable SASE within 28 calendar days of the employee’s start date
For additional information on the WOTC Tax Credit, please contact your Beene Garter Professional at 616.235.5200.