Work Opportunity Tax Credit

Receive federal tax credits of up to $2,400 when you hire candidates participating in the In-Home Learning Program.

What is the Work Opportunity Tax Credit?

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. Qualified summer youth hirees working 400 hours or more can earn employers a tax break of $1,200, while youth working 120 hours qualify the employer for a $750 deduction.

What new hires can qualify for the Work Opportunity Tax Credit?

WOTC applies only to new employees hired after September 30, 1996, and before January 1, 2004 (Congress is currently considering the renewal of WOTC).

The new employee must belong to one of nine target groups:

• A member of a family that is receiving or recently received Temporary Assistance to Needy Families (TANF) or Aid to Families with Dependent Children (AFDC),
• An 18 to 24-year-old, member of a family that is receiving or recently received Food Stamps,
• An 18 to 24-year-old, resident of one of the Federally designated Empowerment Zones (EZs), Enterprise Communities (ECs), or Renewal Communities (RCs),
• A 16-17 year old, EZ/EC or RC resident hired between May 1 and September 15 as a Summer Youth Employee,
• A veteran who is a member of a family that is receiving or recently received Food Stamps,
• A disabled person who completed or is completing rehabilitative services from a State or the U.S. Department of Veterans Affairs,
• An ex-felon who is a member of a low income family,
• A recipient of Supplemental Security Income (SSI) benefits, and/or
• 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.

How can employers participate in the Work Opportunity Tax Credit?

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
  • 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, e.g., a Job Corps center.
  • 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, download from http://www.irs.ustreas.gov/ or call 1-800-829-1040.

To get ETA Form 9061, the WOTC “Individual Characteristics Form,” a brochure, and directories of the State and Regional Coordinators, call the new FAX-ON-DEMAND number at 1-877-828-2050. To access this free service, you may call from a fax machine or your touch tone telephone. You can also get this form and materials by visiting http://www.doleta.gov/business/incentives/opptax/.