Work Opportunity Tax Credit
Employers may claim the Work Opportunity Tax Credit (WOTC) for an individual who is certified by a local or state workforce agency as a member of any of the targeted groups under section 51 of the Internal Revenue Code. Our team can help you identify eligible hires and maximize your WOTC benefits.
What is WOTC?
The WOTC is a federal tax credit available to employers for hiring and employing individuals from certain targeted groups who have faced significant barriers to employment. Eligible employers may receive 40% of the first $24,000 in wages paid to or incurred for each qualified new hire, based on the employee’s target group and the number of hours worked.
In addition to the federal WOTC, many states offer additional benefits on top of the WOTC to further encourage hiring. For example, New York offers up to an additional $20,000 per qualified veteran hire and $7,500 per qualified youth hire.
Company Eligibility & Targeted Groups
To qualify for the credit, the employee must be in their first year of employment, belong to a certified targeted group, and complete at least 400 hours of service for the employer. A reduced credit is available if the employee works between 120 and 400 hours.
- Qualified Supplemental Nutrition Assistance (SNAP or food stamps) Benefits Recipient
- Designated Community Resident
- Qualified Veteran
- Qualified Long-Term Unemployment Recipient
- Long-term Family Assistance Recipient
- Qualified Supplemental Security Income (SSI) Recipient
- Qualified Ex-Felon
- Qualified IV-A Recipient
- Vocational Rehabilitation Referral
- Qualified Summer Youth Employee
What is the Certification & Filing Process for WOTC?
To claim the WOTC, Employers must submit IRS Form 8850 and ETA Form 9061 (and in some cases 9062 and 9175) to the state workforce agency (SWA) within 28 days of the new hire’s start date (additional DOL forms and evidence may be required for certification).
Once certification is received from the state workforce agency, employers can claim the credit on their tax return:
- Taxable Employers: File Form 5884 with their tax return to claim the WOTC
- Tax-exempt Employers: File Form 5884-C with their tax return to claim the WOTC
Navigating the certification and filing process can be complex, and deadlines are strict. Navigating the certification and filing process can be complex, and deadlines are strict. Our team provides guidance and support throughout the process to ensure your documentation is complete and your claim is accurate and timely.
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