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Tax Credit Programs for Employers - Overview

The Work Opportunity Tax Credit (WOTC), created in 1996, and the Welfare-to-Work Tax Credit (WtWTC), created in 1997, are incentives that the Congress provides to private-sector employers for hiring economically disadvantaged individuals with significant barriers to employment who are members of targeted groups, including long-term welfare recipients.

NOTE: On October 4, 2004, the President signed into law the Working Families Tax-Relief Act of 2004 (P.L. 108-311). This legislation extends both the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit (WtWTC) programs, without change, for a two-year period through December 31, 2005. The reauthorization is retroactive to December 31, 2003 and applies to new hires that begin work for an employer after December 31, 2003 and before January 1, 2006.

As employers participate in these two tax credits they find out that:

· it is the employer who makes the hiring decision;

· there are no restrictions on the number of qualified new individuals he/she can hire;

· they can claim up to $8,500 in potential tax credits;

· the credits are applied to taxes due to the Internal Revenue Service, and unused tax credits may be carried over to the next tax year.

See also:

Welfare-to-Work Tax Credit (WtWTC)

Work Opportunity Tax Credit (WOTC)

Source

Information for this topic was drawn from the DOL website at:
http://www.uses.doleta.gov/tax.asp

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