This topic describes the Work Opportunity Tax Credit (WOTC) in a question and answer format. It contains a number of different sections, which you may either read in sequence or jump directly to specific sections in the following list:
· What Is The Work Opportunity Tax Credit?
· What New Hires Can Qualify Employers For WOTC?
· How Can Employers Participate In The WOTC?
· Additional Information
The Work Opportunity Tax Credit (WOTC), authorized by the Small Business Job Protection Act of 1996 (P.L. 104-188), is a federal tax credit that encourages employers to hire nine targeted groups of job seekers by reducing employers’ federal income tax liability by as much as $2,400 per qualified new worker; $750, if working 120 hours or $1,200, if working 400 hours or more, per qualified summer youth.
The WOTC is one tool in a diverse toolbox of flexible strategies designed to help people move from welfare to work and gain on-the-job experience. It joins other education and job training initiatives and targeted tax credits, that help American workers prepare for good jobs; ease the transition from job to job; and create high performance workplaces.
· WOTC applies only to new employees hired after September 30, 1996, and before January 1, 2006
· The new employee must belong to one of nine target groups:
o A member of a family that is receiving or recently received Temporary Assistance to Needy Families (TANF), formerly known as Aid to Families with Dependent Children (AFDC),
o An 18-24 year old member of a family that is receiving or recently received Food Stamps,
o An 18-24 year old resident of one of the Federally designated Empowerment Zones (EZs), Enterprise Communities (ECs), or Renewal Communities (RCs),
o A 16-17 year old EZ/EC or RC resident hired between May 1 and September 15 as a Summer Youth Employee,
o A veteran who is a member of a family that is receiving or recently received Food Stamps,
o A disabled person who completed or is completing rehabilitative services from a State or the U.S. Department of Veterans Affairs (VA),
o An ex-felon who is a member of a low income family,
o A recipient of Supplemental Security Income (SSI) benefits, and/or
o The New York Liberty Zone Business Employee (requires no certification).
· All new adult employees must work a minimum of 120 or 400 hours; Summer Youth must work at least 90 days, between May 1 and September 15.
To receive certification that a new employee qualifies the employer for this tax credit, the employer must:
· Complete the one page IRS Form 8850 by the day the job offer is made.
· Complete either the one page ETA Form 9061 or Form 9062
o If the new employee has already been conditionally certified as belonging to a WOTC target group, complete the bottom part of ETA Form 9062 (and sign and date it), that he or she has been given by a State Employment Security Agency or participating agency.
o If the new employee has not been conditionally certified, the employer and/or the new employee must fill out and complete, sign and date ETA Form 9061
· Mail the signed IRS and ETA forms to the employer's State Workforce Agency. The IRS form must be mailed within 21 days of the employee's employment-start date.
To get IRS Form 8850, the Work Opportunity and Welfare-to-Work Tax Credits Pre-Screening Notice and Certification Request, and instructions, call the IRS at 1-800-829-1040 or download the form and separate instructions in PDF format (requires Adobe Acrobat Reader) from the IRS website at:
Materials available from DOL in PDF format (requires Adobe Acrobat Reader) and the corresponding URL include:
· ETA Form 9061, the WOTC Individual Characteristics Form:
· Employer Tax Credit Brochure:
· Directory of State WOTC Coordinators:
· Directories of National and Regional WOTC Coordinators:
For more information about the WOTC and the WtW tax credits:
· Call or visit your local public State Workforce Agency WOTC Coordinator (use the above mentioned State Directory)
· Call the U.S. Department of Labor Regional WOTC Coordinator nearest you (use the above mentioned Regional Directory)
· Call Karin Loverud at the Internal Revenue Service (IRS) at 202-622-6080
For information about EZ/EC/RC locations, call 1-800-998-9999 or visit their HUD website at:
ETA Handbook No. 408, Third Edition, November 2002 for the Work Opportunity Tax Credit Program and the Welfare-to-Work Tax Credit, from the U.S. Employment Service/ALMIS, U.S. Department of Labor, Employment and Training Administration is available in PDF format (requires Adobe Acrobat Reader) online at:
Tax Credit Programs for Employers - Overview
Welfare-to-Work Tax Credit (WtWTC)
Information for this topic was drawn from the DOL website at:
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