The Work Opportunity Tax Credit (WOTC) is a federal income tax credit that can be claimed by employers who hire employees from one of eight targeted groups.
The WOTC provides the employer with an income tax credit that is based upon the number of hours the employee works annually. Employees must work at least 120 hours to qualify. If the employee works:
- At least 120 hours but less than 400 hours: The employer can claim an income tax credit on 25 percent of the employee's first year wages up to $6,000 (for a maximum credit of $1,500).
- At least 400 hours: The employer can claim an income tax credit on 40 percent of the employee's first year wages up to $6,000 (for a maximum credit of $2,400).
Employers who hire qualified summer youth, working between May 1 and September 15, are eligible for a maximum credit of either $750 (if the youth worked between 120 and 400 hours) or $1,200 (if the youth worked at least 400 hours). Summer youth wages are capped at $3,000 when figuring the amount of the credit.
Businesses may qualify for the WOTC by hiring from one of the following targeted groups:
- Welfare recipients who are members of a family that is that is receiving, or recently received, Temporary Assistance for Needy Families (TANF) for any nine months during the 18 months preceding the date of hire.
- Veterans who are members of a family that received food stamps for at least a 3-month period during the 15 months before the date of hire.
- 18-24 year-old food stamp recipient that has received food stamps for at least the last six months ending on the date of hire, or at least three of the five months preceding the date of hire if the family is no longer eligible for food stamps.
- 18-24 year-old EZ/EC resident who lives in one of the federally designated Empowerment Zones or Enterprise Communities. To locate EZ/EC areas, click here or call 1-800-998-9999.
- 16-17 year-old EZ/EC resident who is hired as a Summer Youth Employee
- Vocational rehabilitation referral a person who is physically or mentally disabled who has completed or is completing rehabilitative services plan or program approved by a State or the U.S. Department of Veterans Affairs.
- Ex-felon who is also a member of a low-income family.
- SSI recipient who received Supplemental Security Income benefits at any point in the 60 days preceding the date of hire.
Applying for the WOTC: Employers must apply for and receive certification from their State Employment Security Agency (SESA) that their new hire is a member of one of the WOTC targeted groups before they can claim the credit on their federal income tax return. To apply for certification, employers must:
- Complete IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Tax Credits, by the date of the job offer, and
- Complete one of the following U.S. Department of Labor forms:
- ETA Form 9061, Individual Characteristics Form, if the new hire has not been given a conditional certification, or
- ETA Form 9062, Conditional Certification Form, if provided to the new employee by a participating agency (such as Job Corps), and
- Mail the signed and dated IRS and ETA forms to the SESA WOTC Coordinator not later than 21 days after the new hire's employment start date.
Obtaining Forms: You can obtain the required forms by viewing and printing them online, requesting them by phone, or requesting them by fax.
|IRS Form 8850||View||1-800-829-1040|
|ETA Form 9061||View||1-877-828-2050|
|SESA WOTC Coordinators||1-877-828-2050|
The ETA form and a directory of SESA WOTC Coordinators are available through the Department of Labor's FAX-ON-DEMAND number at 1-877-828-2050. To access this free service, call the number from your fax machine or your touch tone telephone.