Work Opportunity Tax Credit (WOTC) for Employers
Page Content
About the WOTC Program
WOTC is a Federal tax credit available to employers who hire and retain veterans and/or individuals from other target groups with significant barriers to employment. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are a few simple steps to follow to apply for WOTC. The tax credit employers can claim depends upon the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned. For long-term Temporary Assistance for Needy Families (TANF) applicants, credit is available to employers who hire members of this group for up to a two-year period.
- In the first year, the employer may claim a tax credit equal to 40% of the first-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
- In the second year, the employer may claim a tax credit equal to 50% of the second-year wages, up to the maximum tax credit, if the individual works at least 400 hours.
For all other target groups, the credit is available to employers who hire members of these groups, based on the individual's hours worked and wages earned in the first year.
- If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual's first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual's first year wages, up to the maximum tax credit.
Veterans & other target groups:
- Veterans
- Temporary Assistance for Needy Families (TANF) Recipients
- Supplemental Nutrition Assistance Program (SNAP)
- Food Stamp Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referral
- Ex-felons
- Supplemental Security Income Recipients
- Summer Youth Employee (living in Empowerment Zones)
- Long Term Unemployed (LTUR)
Review
Submit
Check Status
Summary of Legislative Provisions
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) that extends the Work Opportunity Tax Credit (WOTC) retroactively for hires from December 31, 2014 to December 31, 2019. This document provides information and interim instructions to help the State Workforce Agencies (SWAs) implement the PATH Act’s legislative provisions. The Employment and Training Administration (ETA) and the Internal Revenue Service (IRS) will be issuing formal guidance soon and updating WOTC forms as needed. The PATH Act amends Section 51(c)(4) of the Internal Revenue Code of 1986. In summary, Title I—“Extenders,” Subtitle B—“Extensions Through 2019,” Section 142, “Extension and Modification of Work Opportunity Tax Credit,” of this Act:
- Retroactively reauthorizes the WOTC program with all its current target groups, without changes or new provisions, for a 5-year period, after December 31, 2014 to December 31, 2019;
- Introduces a new target group, a Qualified Long-term Unemployment Recipient, which is defined as any individual who is certified by the designated local agency as being in a period of unemployment which:
- is not less than 27 consecutive weeks, and
- includes a period in which the individual was receiving unemployment compensation under State or Federal law.
Full guidance and definition from USDOL/IRS on this new Long-term Unemployment Recipient (LTU) category is still forthcoming. We will hold all LTU applications until guidance is received by the states.
The Department of Labor is working with the Internal Revenue Service (IRS) to issue reauthorization guidance to the state workforce agencies and the employer community. Employers should continue to submit WOTC applications to state workforce agencies within 28 calendar days after the new hire's start date. For further information, visit the
IRS WOTC Website, view ETA's
Interim Instructions on the 2014 Reauthorization and 2015 Hiatus, or look for updates on ETA's national WOTC website at
www.doleta.gov/WOTC/ under "What's New."
Qualified Wages For New Qualified Long-term Unemployment Recipient Target Group
The 1996 legislative provisions that apply to most adult non-veteran target groups for “qualified wages” and amount of the tax credit employers can claim for new hires certified under those target groups also apply to the new target group employees hired after December 31, 2015. Qualified wages for certified new hires under the new Qualified Long-term Unemployment Recipient target group are also capped at $6,000 dollars, during the first year of employment, for a maximum tax credit of up to $2,400 depending on the number of hours the new hire works (i.e., how they meet the provisions of the Minimum Employment or Retention Period).
Tax Credit Amounts and The Minimum Employment or Retention Period For New Qualified Long-term Unemployment Recipient Target Group.
- For WOTC certified new hires working at least 120 hours, employers can claim 25% of the first year wages paid up to $6,000 for a maximum income tax credit of up to $1,500, or For WOTC certified new hires working 400 hours or more, employers can claim 40% of the first year wages up to $6,000 for a maximum income tax credit of up to $2,400.
- The PATH Act retroactive extension applies to individuals who begin work for an employer [and are certified under any of the existing current target groups] after December 31, 2014 and
- The PATH Act provisions that cover the new target group apply to individuals who begin to work for an employer after December 31, 2015, i.e., on or after January 1, 2016.
- The legislative authority for the Empowerment Zones (EZs) expired on December 31, 2014.
The legislative authority for the Empowerment Zones (EZs) expired on December 31, 2014.
Document Submission
Mail completed applications (8850, 9061 or 9062 and all supporting documentation) to:
IDES - WOTC
33 South State Street
10th Floor
Chicago, IL 60603
You may also submit SNAP, TANF and LTUR applications electronically at
ILWOTC (instructions).
Please do not send applications via email or fax due to security concerns.
The IRS generally provides information and guidance as soon as it becomes available at
IRS.gov All related questions should be sent to the
Ask.WOTC@dol.gov e-mail account.
For more information, please contact:
Cynthia E Jones via
email
or phone: 312-793-2973
Jacqueline M. Smith via
email
or phone: 312-793-0158
IDES - WOTC Unit 33 South State Street 10th Floor
Chicago, IL 60603
Our electronic system is designed to determine eligibility for SNAP and TANF applicants only. Thank you.
