Work Opportunity Tax Credit Update

Jan. 23, 2014

The federal work opportunity tax credit (WOTC) expired on Dec. 31, 2013. Before its expiration, WOTC was available for employees hired in one of the following groups:

  • Qualified Temporary Assistance to Needy Families (TANF) recipients
  • Qualified veterans
  • Qualified ex-felons
  • Designated community residents
  • Qualified summer youth employees
  • Vocational rehabilitation referrals
  • Qualified Supplemental Nutrition Assistance Program (SNAP) recipients
  • Qualified Supplemental Security Income (SSI) recipients

An employer normally must take one of the following steps to claim the credit:

  • Obtain certification from a designated local agency (DLA) that the employee is a member of a targeted group.
  • Complete a prescreening notice (Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity Credit”) on or before the day the individual is offered employment, and submit the form to the DLA to request certification no later than 28 days after the individual begins work.

WOTC historically has been part of a tax extenders package that includes many popular tax incentives. As recently as 2012, WOTC was allowed to expire, but it was retroactively extended in January 2013 for all of 2012 and 2013. Taxpayers were granted limited relief to collect the required documentation in 2013 for 2012 WOTC claims.

Although there is no guarantee WOTC will be extended for some or all of these targeted groups, businesses hiring employees that would have qualified for the credit as it existed on Dec. 31, 2013, should continue to collect and remit documentation for qualified employees. The Department of Labor indicated in an internal guidance letter that although it will not process WOTC certification requests unless and until WOTC is reinstated, it will accept and hold applications for certification. Businesses that continue to prepare and remit the documentation minimize the risk of losing otherwise allowable credits should WOTC be extended.

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David Holets
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Lou Miller
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