September 28 Deadline Approaches For Work Opportunity Tax Credit Certification

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September 27, 2016

The IRS recently reminded employers to certify certain new hires by September 28 to qualify for the newly expanded Work Opportunity Tax Credit (WOTC).  The WOTC is a federal tax credit available to employers who hire eligible workers—e.g., certain veterans, public assistance recipients—who have consistently faced significant barriers to employment.  Congress enacted the Protecting Americans from Tax Hikes (PATH) Act last December, which retroactively extended the WOTC for nine categories of eligible workers hired on or after January 1, 2015, and adding a tenth category for certain long-term unemployment recipients hired on or after January 1, 2016.  Accordingly, the ten categories of eligible workers include:

  • Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients;
  • Unemployed veterans, including disabled veterans;
  • Ex-felons;
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties;
  • Vocational rehabilitation referrals;
  • Summer youth employees living in Empowerment Zones;
  • Food stamp (SNAP) recipients;
  • Supplemental Security Income (SSI) recipients;
  • Long-term family assistance recipients;
  • Qualified long-term unemployment recipients (who begin work after 2015).

To qualify for the WOTC, an employer normally must first request certification by filing the IRS’s Form 8850 with the applicable state workforce agency within 28 days after the eligible worker begins to work.  Under the transition relief, however, the certification deadline is extended to September 28, 2016, for eligible workers hired between January 1, 2015, and August 31, 2016.  To claim the WOTC when filing its income tax returns, an employer calculates the WOTC on Form 5884, and claims it as a general business credit on Form 3800.

Additional requirements for claiming the WOTC credit can be found in the instructions to Form 8850, Notice 2016-22, and Notice 2016-40.