Work Opportunity Tax Credit

WHAT IS THE WORK OPPORTUNITY TAX CREDIT?

The Work Opportunity Tax Credit (WOTC) was designed to provide a tax incentive to employers for hiring individuals from certain target groups to help them enter or re-enter the labor force.

 

HOW IS THE WORK OPPORTUNITY TAX CREDIT (WOTC) CALCULATED?

Tax credits are computed on the first year wages of each qualified employee. The tax credit for both felons and qualified veterans is up to $1,500 for employees working at least 120 hours per year and up to $2,400 for employees working at least 400 hours per year.

 

WHO QUALIFIES FOR THE WORK OPPORTUNITY TAX CREDIT (WOTC)?

Re-entry Center of Ocala felons who have become convicted of a felony under any statute of the United States.
veterans who have served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days.
The IRS Form 8850 and ETA Form 9061 MUST be completed and returned in order for the employer to receive the tax credit.

 

BACKGROUND AND UPDATES:

Use of the WOTC has substantially increased in recent years as Congress has introduced new target groups, expanded several target groups requirements, increased the tax credit for certain groups and introduced new flexible filing provisions.
For example, during the fiscal year 2010, over 849,868 certifications were issued by the state workforce agencies, and this figure is growing every year.

HOW DO I BECOME ELIGIBLE TO RECEIVE THE WORK OPPORTUNITY TAX CREDIT (WOTC)?

STEP 1:  SUBMIT A COMPLETED IRS FORM 8850


Each item listed on IRS Form 8850 MUST be completed and should be dated on or before the start date of employment.
IRS Form 8850 MUST contain the original signature of both the applicant and the employer.

NOTE: A receipt of a copy or a fax of a completed IRS Form 8850 DOES NOT satisfy the statutory requirement of an original signature.

IRS Form 8850 is double-sided. Both sides must be completed and the form MUST be postmarked within 28 days of the start date of employment.

IRS Form 8850: DOWNLOAD then Print
IRS 8850 Instr.: DOWNLOAD then Print

STEP 2 SUBMIT A COMPLETED ETA FORM 9061


Each Item on the 9061 should be completed.

NOTE: A completed form is one that has been signed by the employee, employer or employer representative and has a yes marked on at least one target group. The signature of the party completing the 9061 does not have to be an original signature.

Documentation is required for some target groups. When required and available for a particular target group, it should be submitted with the 9061. If it is not possible to obtain the documentation within the time frame that will allow submission of the 8850 to meet the 28-day deadline, submit the 8850 and 9061 without the documentation and wait to receive a letter from WOTC staff requesting the documentation. (Waiting to receive the letter before sending the documentation will insure that the IRS has received the 8850 and 9061 and entered it into their system).

NOTE: When submitting the 8850, 9061 and any required documentation, please submit it with the 8850 on top, followed by the 9061 and then the documentation. Such order facilitates processing.

ETA Form 9061: DOWNLOAD then Print

Once the required hours are met and the employer has the letter of certification, he/she must file IRS Form 5584 with the IRS to obtain the WOTC.