The Work Opportunity Tax Credit (“WOTC”) was supposed to expire after December 2014, but instead it was expanded and extended through 2019. Generally, the credit is 40% of wages up to certain limits, for new employees who are members of “hard to employ” targeted groups. The wage limit is generally $6,000, but drops to $3,000 for summer youths, and increases up to $24,000 for certain veterans. To claim the credit an employer must have the employee certified as eligible prior to the first day of work, or apply for certification within 28 days of that first day of work. Except now.
Since the WOTC was retroactively extended, employers have until May 31, 2016 to apply for certification for eligible employees hired after January 1, 2015, and for one new targeted group the deadline is June 29, 2016. After May 31/June 29, the old 28 day deadline will apply.
UPDATE 6/20/16 : Even More Transition Relief! IRS Note 2016-40 extends transition relief to August 31, 2016
Why does this matter? Employers (including nonprofits, by the way) have a very short window to review their new hires in 2015 - 2016 for anyone who might be in a targeted group, and to apply for certification of eligibility. It could be well worth the effort.
WOTC Targeted Groups
Definitions are more specific, and it can get complicated, but targeted groups can include the following:
Qualified IV-A recipient. An individual who is a member of a family receiving Temporary Assistance for Needy Families (TANF).
Qualified veteran. A veteran who is any of the following.
- A member of a family that has received Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date.
- Unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.
- Entitled to compensation for a service-connected disability and is hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces.
- Entitled to compensation for a service-connected disability and was unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.
Qualified ex-felon, hired within one year from release from prison.
Designated community resident. An individual who is at least age 18 but not yet age 40 on the hiring date and lives within an empowerment zone or rural renewal county.
Vocational rehabilitation referral. An individual who has a physical or mental disability who was referred to the employer under the Ticket to Work program, or by the Department of Veterans Affairs.
Summer youth employee. An individual age 16-17 who lives within an empowerment zone.
Recipient of SNAP benefits (food stamps). An individual who is at least age 18 but not yet age 40 on the hiring date, and is a member of a family that has received SNAP benefits for the 6-month period ending on the hiring date; or is no longer eligible for such assistance but the family received SNAP benefits for at least 3 months of the 5-month period ending on the hiring date.
SSI recipient.
Long-term family assistance recipient. An individual who is a member of a family that has received TANF payments for a specified period of time.
Qualified long-term unemployment recipient. An individual hired after 2015 who, immediately before beginning work is in a period of unemployment that is not less than 27 consecutive weeks and received unemployment benefits for at least part of that time.
If you have new hires that might meet these criteria, get Form 8850 and instructions for more information.
