Neil &  Company CPAs, PC

A Professional Corporation

1184 North 15th Street, Bozeman, MT 59715

 

Phone: 406-587-9239

 

May 2022

The Work Opportunity Tax Credit

The Work Opportunity Tax Credit

Hiring people with significant barriers to entering the workforce could earn your business a tax credit of up to $9,600 per worker. It’s available through the Work Opportunity Tax Credit (WOTC), which was extended through 2025.


TARGETED GROUPS TO HIRE
The purpose of this program is to entice business owners to hire underpriviledged people from target groups. You can usually obtain a list of potential applicants through your state workforce agency, but here are some of the eligible groups of potential employees:
  • Long-term unemployed (those collecting unemployment benefits for at least 27 consecutive weeks)

  • Most veterans

  • Food stamp or SSI recipients

  • Qualified ex-felons


There is no limit to the number of new team members you can hire to qualify for the credit. However, there is a requirement that the new hires work a specified number of hours. Your tax professional can provide more information.


HOW TO QUALIFY A WORKER
Before claiming the credit, employers must apply for and receive a certification, verifying that the new hire is a targeted group member. This is done by completing IRS Form 8850 and a Federal Department of Labor Form 9061, which is then submitted to your state workforce agency. Keep in mind that both the potential new hire and the employer must sign these forms, and they should be forwarded to your state within 28 days of the employee’s start date.


If your new hire qualifies for the WOTC targeted group, you’ll receive a certification from the state workforce agency.


APPLY FOR THE CREDIT
Once an employee is deemed qualified, you must submit an application for the credit to the IRS along with the business’s or owner’s tax return. The credit amount is based on the category of workers, the hours worked and wages paid to them in their first year. Most employers will then claim the WOTC as a general business credit against their income taxes.


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