Work Opportunity Tax Credit

What Is the Work Opportunity Tax Credit (WOTC)?
WOTC is a Federal tax credit incentive that Congress provides to private-for-profit businesses for hiring individuals from "target groups" who have consistently faced significant barriers to employment. The main objective of this program is to enable persons in these target groups to become employed and gradually move from economic dependency into self-sufficiency as they earn a steady income and become contributing tax payers, while the participating employers are compensated by being able to reduce their federal income tax liability.

How much is the tax credit?
$2,400 for each new adult hire;
$1,200 for each new summer youth hire;
$4,800 for each new disabled veteran hire, and
$9,000 for each new long-term family assistance recipient hire over a two-year period.

What is the minimum employment or retention period?
All new adult employees must work a minimum of 120 hours. Individuals hired as Summer Youth employees must work at least 90 days, between May 1 and September 15, before an employer is eligible to claim the tax credit. The WOTC amount an employer may claim depends on the hours the employee works. The credit is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours and 40% for those employed 400 hours or more.

What are Target Groups?

1. TANF Recipient
   A member of a family that is receiving or recently received Temporary Assistance to Needy Families (TANF) benefits for any 9-month period during the 18-month period ending on the hiring date.
   


2. Veteran
   A veteran who is a member of a family that is receiving or recently received food and nutrition (food stamps) for at least a 3-month period during the past 15 months; and for individuals who began working for an employer after May 25, 2007, the veteran group is expanded to include "Disabled Veteran" who are entitled to compensation for a service-connected disability and who, during the one-year ending on the hiring date, were: a) discharged or released from active duty in the U.S. Armed Forces, or b) unemployed for a period or periods totaling at least 6 months. The first-year wages taken into account for these "disabled veterans" are capped at $12,000.
   

   Note: purposes of the WOTC program, a veteran must have served on active duty (not including training) in the Armed Forces of the United states for more than 180 days or have been discharged or released from active duty for a service-connected disability.

3. Ex-Felon
   An individual who has been convicted of a felony and has a hiring date which is not more than one year after the last date on which he was convicted or released from prison.



4. Designated Community Resident
   An 18 -39 year old resident of one of the federally designated Empowerment Zone (EZ), Enterprise Community (EC) or Renewal Communities (RC).



5. Vocational Rehabilitation Recipient
   An individual who completed or is completing rehabilitative services from a State certified agency, an Employment Network or the U.S. Department of Veterans Affairs.



6. Summer Youth
   A 16-17 year old EZ/EC or RC resident hired between May 1 and September 15.



7. Food Stamp Recipient
   An 18-39 year old member of a family that received Food and Nutrition (Food Stamp) benefits for the past 6 months, or received Food and Nutrition benefits for at least 3 of the past 5 months.



8. Supplemental Security Income Recipient
   A recipient of Supplemental Security Income (SSI) benefits for any month ending during the past 60 day period ending on the hire date.



9. Long-term TANF Recipient A member of a family that receives or recently received TANF payments for at least 18 consecutive months ending on the hiring date, or received TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, and the earliest 18-month period beginning after August 5, 1997 ended during the past 2 years, or stopped being eligible for TANF payments during the past 2 years because federal or state law limited the maximum time those payments could be made.



10. Unemployed Veteran A veteran discharged or released from active duty in the U.S. Armed Forces at any time during the 5-year period ending on the hiring date and received unemployment compensation under state or federal law for at least 4 weeks during the 1-year period ending on the hiring date.



11. Disconnected Youth An individual who is certified as: 1) between the ages of 16 - not yet 25 on the hiring date, 2) not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date, 3) not regularly employed during such 6-month period, and 4) not readily employable by reason of lacking a sufficient number of basic skills.

How can employers participate in the WOTC program?
To receive certification that a new employee qualifies for this tax credit, the employer must:

1. Complete page one of IRS Form 8850 by the day the job offer is made
2. Complete page two of IRS Form 8850 after the individual is hired.
3. Complete either the one page ETA Form 9061 or Form 9062 as appropriate. For example:
1. If the new employee has already been conditionally certified as belonging to a WOTC target group by a State Workforce Agency (SWA) or participating agency, complete the bottom part of ETA Form 9062, sign and date, or
2. If the new employee has not been conditionally certified, the employer and the new employee must complete, sign and date ETA Form 9061.
4. Mail the completed and signed IRS and ETA forms to the employer's SWA within 28 days after the employee's employment -start date for all individuals who begin work for an employer on or after January 1, 2007.

How do I get more information about WOTC?

For more information contact the WOTC Coordinator at:

Employment Security Commission of North Carolina
Attn: Applicant Services Unit; WOTC
P.O. Box 27625
Raleigh, North Carolina
(919) 733-4896 (phone)
(919) 733-3010 (fax)

Click here for IRS Form 8850, http://www.irs.gov/pub/irs-pdf/f8850.pdf. The Work Opportunity Tax Credit Pre-Screening Notice and Certification Request, and its Instructions http://www.irs.gov/pub/irs-pdf/f8850.pdf, or download from http:///www.irs.gov

Click here for ETA Form 9061, http://www.doleta.gov/business/incentives/opptax/PDF/WOTC_ETA_Form_9061.pdf the Individual Characteristics Form.

For information about EZ/EC/RC locations, visit the U.S. Department of Housing and Urban Development (HUD's) web site at http://www.hud.gov/cr or call 1-800-998-9999.