Work Opportunity Tax Credit (WOTC)
What you need to know to save up to $2,400 per employee on federal taxes
What is the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit (WOTC) is a tax credit offered to employers as an incentive to hire individuals who are members of targeted groups, which have traditionally faced significant barriers to employment. The credit is used to reduce the federal tax liability of private/for-profit employers.
Eligible Target Groups
TANF - a member of a family that has received assistance from Aid to Dependent Children (AFDC) or its successor program Temporary Assistance to Needy Families (TANF) for any 9 months within the last 18 months.
Veteran/Disabled Veteran/Unemployed Veteran - There are five (5) Veteran categories: (2Ba) a Veteran and member of a family that received food stamps for at least 3 of the 15 months preceding the date of hire; (2Bb) a Disabled Veteran who is entitled to a service-connected disability and has a hiring date within the one (1) year period following discharge or release from active duty in the Armed Forces; (2Bc) a Disabled Veteran having aggregate periods of unemployment of six (6) months or more during the year prior to hiring; (2Bd) a veteran having aggregate periods of unemployment of at least four (4) weeks but less than six (6) months in the year prior to hiring; (2Be) a Veteran having aggregate periods of unemployment of six (6) months or more in the year prior to hiring.
Ex-Felon - a person convicted of a felony AND within the past year was either convicted or released from prison.
Designated Community Resident - is an individual who attained age 18 but not yet 40 on the hiring date and his/her principal place of abode (residing) within an Empowerment Zone or a Rural Renewal County.
Vocational Rehabilitation Recipient - a person with a disability who has received or is receiving vocational rehabilitation from a rehabilitation agency approved by the state or the Department of Veterans Affairs. (Drug/alcohol rehab does not qualify.) Also including a Ticket to Work holder who has an Individual Work Plan with an employment network agency.
Summer Youth - a person a least age 16 but not 18 on the hiring date and who has a principal residence in an Empowerment Zone or Rural Renewal County during a 90-day summer working period (May 1 through September 15).
Food Stamp Recipient - a person who is at least 18 but under age 40, AND is a member of a family that has received food stamps for the last 6 months; OR received food stamps for at least 3 of the last 5 months, AND is no longer eligible to receive them.
SSI Recipient - a person receiving Supplemental Security Income (SSI) benefits for any month during the 60 days preceding the date of hire.
Long-term Family Assistance Recipients - a qualified long-term family assistance recipients is an individual certified by a designated local agency as being: (1) a member of a family that has received family assistance for at least 18 consecutive months ending on the hiring date; (2) a member of a family that has received such family assistance for a total of at least 18 months (whether or not consecutive) after August 5, 1997 (the date of enactment of the welfare-to-work tax credit) if the individual is hired within two years after the date that the 18 month total is reached; or (3) a member of a family who is no longer eligible for family assistance because of either Federal or State time limits, if the individual is hired with two years after the Federal or State time limits made the family ineligible for family assistance.
Long-term Unemployed Recipient (LTUR) is an individual who on the day before the individual begins work, or if earlier, the day the individual completes the IRS Form 8850 is in a period of unemployment that is not less than 27 consecutive weeks; and (ii)includes a period (which may be less than 27 weeks) in which the individual received unemployment compensation under State or Federal law.
How Long Must the Employee Work in Order For the Employer to Claim the Credit?
Employers can claim 25% of the qualified first-year wages up to $6,000 for employees working, at least 120 hours but less than 400. For employees working a least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first-year wages up to $6,000. This allows a maximum credit of $2,400. The Long Term Family Assistance recipient is calculated at 40% of the qualified first-year wages up to $10,000 and 50% of qualified second-year wages, maximum savings $9,000. For the Summer Youth target group, the credit is calculated at a rate of 25% of the qualified first-year wages up to $3,000. For the disabled veteran and long term unemployed Veterans, the maximum qualifying wages range from $12,000 to $24,000.
What do I Need to Do?
When an employer believes that a prospective employee meets the qualifications for WOTC, on or prior to the date the job offer is made, the following steps should be taken:
- The employer completes the employer section of the IRS FORM 8850, "Work Opportunity Credit Pre-Screening Notice and Certification Request" and then has the job seeker complete the first page. Make certain that the applicant signs the form. –Signatures must be original–
- Complete either the Department of Labor ETA Form 9061 or ETA 9062.
- Mail the completed IRS 8850 and ETA 9061 or ETA 9062 to your state/local WOTC coordinator within 28 days after the employee's first day at work and mail them to the address indicated below. The postmark will be used to establish the date of submission.
- Applications may be submitted online. Please submit an inquiry to WOTC8850@oesc.state.ok.us
Jobseeker - Complete forms IRS 8850 and ETA 9061. If an individual falls into the Long-term Unemployed Recipient (LTUR) group, also complete ETA 9175. Also, complete Letter of Introduction to Employers about WOTC.
ETA FORM 9061, "Individual Characteristics" form if the new employee has not been conditionally certified. This form should be accompanied by documentation validating the employee's eligibility. (ETA Form 9061 - Spanish) (Not to be used for submission)
ETA FORM 9062, "Conditional Certification Form" if provided to the jobseeker by a participating agency/center.
ETA Form 9175, "Long-Term Unemployment Recipient Self-Attestation form" (exp 01/31/2020)