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Last Call for Work Opportunity Tax Credit

August 13, 2019
 
The Work Opportunity Tax Credit (WOTC), a federal tax benefit available to employers for hiring individuals from groups that have faced significant barriers to employment, expires at year end unless Congress acts to extend it. 
 
The WOTC is a joint effort of the US Department of Labor and the Internal Revenue Service. In Massachusetts, interested employers should contact the Department of Career Services https://www.mass.gov/orgs/masshire-department-of-career-services for information on how to apply. 
WOTC workforce target groups include: 
 
Qualified IV-A recipient - A member of a family receiving assistance under Temporary Assistance for Needy Families (TANF). TANF must be received for any nine-month period during the 18-month period ending on the hiring date.
 
Qualified veteran - A veteran who is any of the following:
  • Member of a family receiving assistance under the SNAP (food stamps program) for at least three months during the first 15 months of employment.
  • Unemployed for a period totaling at least four weeks (whether or not consecutive) but less than six months in the one-year period ending on the hiring date.
  • Unemployed for a period totaling at least six months (whether or not consecutive) in the one-year period ending on the hiring date.
  • A disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces.
  • A disabled veteran entitled to compensation for a service-connected disability who is unemployed for a period totaling at least six months (whether or not consecutive) in the one-year period ending on the hiring date.
Qualified ex-felon – A person hired within a year of:
  • Being convicted of a felony or
  • Being released from prison after the felony
Designated community resident - An individual who, on the date of hiring:
  • Is at least 18 years old and under 40.
  • Resides within one of the following: a empowerment zone, an enterprise community or a renewal community and continues to reside at the locations after employment.  (Click on this link to find the empowerment zones in Massachusetts.) https://www.mass.gov/service-details/opportunity-zone-map
Vocational rehabilitation referral -  A person who has a physical or mental disability and has been referred to the employer while receiving, or upon completion of, rehabilitative services pursuant to:
  • A state plan approved under the Rehabilitation Act of 1973; or
  • An employment network program under the Ticket to Work program; or
  • A program carried out under the Department of Veterans Affairs.
Recipient of SNAP benefits (food stamps) - An individual who on the date of hire is:
  • At least 18 years old and under 40; and
  • A member of a family that received SNAP benefits for the previous six months or at least three of the previous five months
Summer Youth Employee – A employee who:
  • Is at least 16 years old, but under 18 on the date of hire or on May 1, whichever is later; and
  • Is employed only between May 1 and September 15 (was not employed prior to May 1); and
  • Resides in an empowerment zone (EZ), enterprise community or renewal community.
Supplemental Security Income (SSI) recipient - An individual is a “qualified SSI recipient” if a month for which this person received SSI benefits is within 60 days of the date this person is hired.
 
Long-term family assistance recipient -  An individual who at the time of hiring is a member of a family that meets one of the following conditions:
  • Received assistance under an IV-A program for a minimum of the prior 18 consecutive months; or
  • Received assistance for 18 months beginning after August 5,1997 and it has not been more than two years since the end of the earliest of such 18-month period; or
  • Ceased to be eligible for such assistance because a federal or state law limited the maximum time those payments could be made, and it has been not more than two years since the cessation.
Qualified long-term unemployment recipient -  A person who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during some or all or the unemployment period. 
 
An employer must obtain certification that an individual is a member of the targeted group claiming the credit. An eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after s/he begins work. Employers should contact their individual state workforce agency with any specific processing questions for Forms 8850.
 
Limitations on the Credits
 
The credit is limited to the amount of the business income tax liability or social security tax owed. A taxable business may apply the credit against its business income tax liability, and the normal carry-back and carry-forward rules apply. For qualified tax-exempt organizations, the credit is limited to the amount of employer social security tax owed on wages paid to all employees for the period the credit is claimed.
 
Qualified tax-exempt organizations will claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, as a credit against the employer’s share of Social Security tax. The credit will not affect the employer’s Social Security tax liability reported on the organization’s employment tax return.
 
Taxable Employers
 
After the required certification is secured, taxable employers claim the tax credit as a general business credit on Form 3800 against their income tax by filing the following:
 
AIM members with questions about this or any other HR-related issue may call the AIM Employer Hotline at 1-800-470-6277.
 
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