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Work Opportunity Tax Credit Benefits Workers and Employers

The Work Opportunity Tax Credit has been renewed retroactively to January 1, 2015 AND has been extended 5 years through December 31, 2019.

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment.  WOTC benefits both employers and workers by helping targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers are able to reduce their income tax liability.
WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

While the specific instructions for the newly-extended 2015-2019 WOTC have not yet been released by the IRS, the targeted job applicant groups should remain unchanged with the notable addition of a new target hire group:  The Long-Term Unemployed.   The tax extender bill defines “long-term unemployed” as an individual who has exhausted their regular unemployment compensation (the first 26 weeks of unemployment benefits, or slightly over six months) since the economic crisis began in 2007.

Other Targeted Group Members meeting WOTC eligibility include:

  • Qualified Veterans
  • Qualified IV-A (Temporary Assistance for Needy Families) Recipients
  • Designated Community (Empowerment Zone or Rural Renewal County) Resident
  • Vocational Rehabilitation Referral
  • Qualified Summer Youth Employee
  • Qualified Ex-Felons
    (See your Hysjulien and Associates tax professional for a complete and up-to-date listing of all WOTC Target Groups) 

The benefits to employers for hiring a WOTC-eligible worker may be significant.  For example, based upon the current standards, an non tax-exempt employer hiring a disabled veteran who is certified as having aggregate periods of unemployment of 6 months or more in the year prior to being hired would be eligible to receive up to 40% of $24,000 of first year wages paid for a maximum credit of $9,600!

There are several steps that must be completed by employers prior to claiming any benefits under WOTC.  Potentially eligible workers must be pre-screened via IRS Form 8850 and employers must make a written request to the state workforce agency in the state where the employee will be working.  In addition, there are minimum number-of-hours-worked requirements and other forms and recordkeeping requirements.

For more details regarding the Work Opportunity Tax Credit and how it may benefit your personal tax situation, please contact your Hysjulien and Associates tax and accounting professional.


February 2nd, 2016

Posted in Featured,Tax

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