Links:
What is the WOTC Tax Credit Program?
Who is Helped by WOTC
Tax Credit?
How Much is the Tax
Credit?
Who
are the Targeted Groups?
Who Doesn't
Qualify?
Instructions for
Employers in Alaska
How to Get Forms
Contacts for
Additional Information
How to Find Tax Credit
Qualified Applicants
WOTC Information Sheet
IRS Form 8850
ETA Form 9061
Disconnected Youth Self-Attestation Form
Notice to Employers:
The Tax Credit program was extended through August 31, 2011. This occurred when the President signed The Small Business and Work Opportunity Tax Act of 2007 into law on May 25, 2007.
On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009 (Recovery Act). The Recovery Act introduced two new target groups: 1) Unemployed Veterans and 2) Disconnected Youth, who begin work for an employer during 2009 or 2010. The 28-day filing deadline is waived for individuals in these two targeted groups who started work during the period of January 1, 2009 through September 16, 2009. The Form 8850 must be postmarked no later than October 17, 2009, for the employer’s application to be considered timely.
What is the WOTC Tax Credit Program?
Employer tax credits are an important part of the diverse strategies designed to help people gain on-the-job experience and acquire better employment. The Work Opportunity Tax Credit (WOTC) program offers federal tax credits to employers as an incentive to hire people in several specific target groups.
Who is Helped by the WOTC Tax Credit?
WOTC helps both employers and targeted job seekers. Employers save as tax credits help defray payroll expenses. Job seekers qualifying as a member of one of the targeted groups gain an advantage in the job market.
How Much is the Tax Credit?
For WOTC: Work Opportunity Tax Credits have a two-tiered credit based on the first $6,000 of earnings:
- A 25% credit for workers who worked at least 120 hours but less than 400 hours, and
- A 40% credit for workers who worked at least 400 hours ($2,400 maximum credit)
Qualified Wages for WOTC are the first $6,000 of wages paid within the first year of employment to target group individuals
For Long Term Family Assistance-- tax credits can be earned for the first two years of employment:
- 40% of the first $10,000 of qualified wages* paid in the first year of employment, providing a maximum first year credit of $3,500.
- 50% of the first $10,000 of qualified wages* paid in the second year of employment, providing a maximum second year credit of $5,000.
*Qualified Wages for Long Term Family Assistance include the first $10,000 of wages paid within each of the first two years of employment to a qualified individual who begins work for the employer after December 31, 2006 and before January 1, 2008. For Long Term Family Assistance, "qualified wages" includes amounts paid to employees for accident and health plans, educational assistance programs, and dependent care assistance programs. An employee must work at least 400 hours or 180 days each year before a Long Term Family Assistance tax credit can be claimed.
Who are the Targeted Groups?
WOTC Target Groups:
A. TANF Recipient - a member of a family that has received Temporary Assistance for Needy Families through a program such as the Alaska Temporary Assistance Program (ATAP) for at least - any nine months within the last 18 months.
B. Veteran - a veteran and member of a family that received Food Stamps for at least a three-month period within the last 15 months.
C. Ex-felon - a person convicted of a felony, who, within the past year was either convicted or released from prison.
D. Designated Community Residents – ages 18-39; must reside in an empowerment zone (EZ) or renewal community (RC).
E. Vocational Rehabilitation referral - a disabled person who has completed or is completing rehabilitative services from a rehabilitation agency approved by the state or the Department of Veterans Affairs.
F. Qualified Summer Youth – age 16, but not yet 18; works between May 1 and Sept. 15; must reside in an EZ or RC.
G. Food Stamp Recipient - between the ages of 18 - 39, AND, member of a family that has received food stamps for the last six months, OR received food stamps for at least three of the last five months, BUT is no longer eligible to receive them.
H. SSI Recipient - a person who has received Supplemental Security Income (SSI - under Title XVI of the Social Security Act) benefits for any month ending within the last 60 days.
I. Long-term Family Assistance Recipient - an individual may be certified as a long-term family assistance recipient if he or she is a member of a family that:
- Received TANF payments for the 18 month period (consecutive) ending on the hire date, OR
- Received TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, OR
- After August 5, 1997, stops being eligible for assistance payments because federal or state law limits the maximum period such assistance is payable, and the individual is hired not more than two years after such eligibility for assistance ends.
J. Unemployed Veteran - a veteran who has been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and received of unemployment compensation under the State or Federal law for at least 4 weeks during the 1-year period ending on the hiring date.
K. Disconnected Youth - an individual who is age 16 but not yet age 25; not regularly attending any secondary, technical, or post –secondary school; not regularly employed for 6 months; and not readily employable due to lacking basic skills. Employers who wish to qualify for the Disconnected Youth category must submit Forms 9061 and 8850 and attach a self-attestation form completed by their new hire employee.
The Internal Revenue Bulletin Notice for Unemployed Veteran and Disconnected Youth category is available at http://www.irs.gov/pub/irs-drop/n-09-28.pdf for more detailed guidance from the IRS.
Who Doesn't Qualify?
- Employers may not claim the credit for former employees, regardless of how long it has been since the employee last worked for them.
- Employers may not claim the credit for family members or relatives.
WOTC Instructions for Employers in
Alaska |
What Steps Do Employers Need To Take To Earn These Tax Credits?
Employers must apply and receive certification from the Alaska Department of Labor and Workforce Development, Employment Security Division, that their newly hired employee belongs to one of the target groups eligible for the Work Opportunity Tax Credit before claiming credit on their federal income tax return. Form 8850 must be postmarked within 28 calendar days of the date the applicant starts work.
Only three steps to apply for WOTC certification for a new
employee:
1) Complete Form 8850, "Pre-Screening Notice and Certification
Request". Form 8850 Instructions.
a) Have all job applicants complete page one of Form 8850 on or before the day a job offer is made. Make
sure applicants sign the forms.
b) Employers should complete page two of Form 8850 if the job
applicant is hired and has checked box 1, 2, 3, or 4 on the first page
of the form.
2) Complete one of the following Department of Labor and
Workforce Development forms:
a) Form ETA-9061: Complete ETA-Form 9061, "Individual
Characteristics Form," if the job applicant does not have a completed
ETA Form 9062 from a service provider.
b) Form ETA-9062: Client service providers, such as Public
Assistance or Vocational Rehabilitation, will provide job applicants
with ETA Form 9062, "Conditional Certification," identifying them as a
member of a WOTC target group. Job applicants will give this form to
potential employers.
3) Mail completed Form 8850, and Form 9061 or Form 9062 to:
Alaska Department of Labor and Workforce Development
Employment Security Division
WOTC Coordinator
P.O. Box 115509
Juneau, AK 99811-5509
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Form 8850 must be postmarked within 28 days of the date the
applicant starts work. Form 8850 cannot be accepted by fax or
email. Applications filed late will be denied.
What is a Certification?
Form ETA-9063, "WOTC Certification," is sent to employers
verifying that an applicant is WOTC eligible and may qualify the
employer for the federal tax credit. This form should be retained for
the employer's IRS records.
How does an Employer obtain the Tax Credit?
Employers use IRS Form 5884, "Work Opportunity Credit," to
claim their WOTC tax credit. Form 5884 is filed with employer's federal
income tax return.
How is the Tax Credit Applied?
The credit is usually applied to the employer's tax liability for the
tax year in which the employee is hired. If the credit exceeds the
current year's tax liability, the employer may apply the remaining
credit to the previous year's tax liability. This may be carried back
three years or forward 15 years. For more information on unused credits,
employers should contact the IRS or their tax accountant.
How to get Forms
Contacts for Additional Information
How to find Tax Credit Qualified Applicants
Contact your local Job Center
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