What is the WOTC?
This long-standing tax benefit encourages employers to hire workers certified as members of any of ten targeted groups facing barriers to employment. With millions of Americans out of work at one time or another since the pandemic began, one of these targeted groups is long-term unemployment recipients who have been unemployed for at least 27 consecutive weeks and received state or federal unemployment benefits during part or all of that time. The WOTC is available for wages paid to certain individuals who begin work on or before December 31, 2025.
The other groups include certain veterans and recipients of various kinds of public assistance, among others. Specifically, the 10 groups are:
- Temporary Assistance for Needy Families (TANF) recipients,
- Unemployed veterans, including disabled veterans,
- Formerly incarcerated individuals,
- Designated community residents living in Empowerment Zones or Rural Renewal Counties,
- Vocational rehabilitation referrals,
- Summer youth employees living in Empowerment Zones,
- Supplemental Nutrition Assistance Program (SNAP) recipients,
- Supplemental Security Income (SSI) recipients,
- Long-term family assistance recipients and
- Long-term unemployment recipients.
Qualifying for the credit
To qualify for the credit, an employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency (SWA). It must be submitted to the SWA within 28 days after the eligible worker begins work. Employers should not submit Form 8850 to the IRS.
Claiming the credit
Eligible businesses then claim the WOTC on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment. This is a one-time credit for each new hire and an employer cannot claim the WOTC for employees who are rehired.
If you want to learn more about the WOTC or any other tax matter, give us a call! Reducing your tax liability is a year-round process. The earlier you start, the more of your hard-earned money that you get to keep!