The legislative authority for the WOTC program, which had expired on December 31, 2014, has been extended retroactively. President Obama signed the tax extenders bill (the Act) on December 18, 2015. The current Act extends the WOTC program through December 31, 2019, and retroactively reauthorizes the program for new employees hired on or after January 1, 2015.
Every target group was extended through 2019 except for the HUD EZ target group.View the WOTC target groups. The Act also includes a new target group - Qualified Long Term Unemployed Recipient.The term 'qualified long-term unemployment recipient' means any individual who is certified by the designated local agency as being in a period of unemployment which is not less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law.
What is WOTC?
WOTC is a Federal tax credit available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are a few simple steps to follow to apply for WOTC.
Note: To get the latest updates on WOTC sign up for US Dept of Labor email notifications - http://www.dol.gov/opa/media/press/opa/
How does WOTC work?
The tax credit employers can claim depends on the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned.
- If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual's first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual's first year wages, up to the maximum tax credit.
Only for the Long-term Temporary Assistance for Needy Families (TANF) target group, the credit is available to employers who hire members of this group for a two-year period.
- If the individual works at least 120 hours in the first year, the employer may claim a tax credit equal to 40% of first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours in the second year, the employer may claim a tax credit equal to 50% of second year wages, up to the maximum tax credit.
Who can I hire?
Employers may submit certification requests to the state workforce agency for all WOTC target groups listed below.
- Veterans – 5 categories
- TANF Recipients
- SNAP (Food Stamp) Recipients
- Designated Community Residents
- Vocational Rehabilitation Referral
- Supplemental Security Income Recipients
- Summer Youth
- Long-Term Unemployed Recipient
How are the tax credits calculated?
Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. Use the WOTC Calculator to see how much your business can earn in tax credits.
How do I apply?
- Complete page 1 of IRS Form 8850 by the day the job offer is made.
- Complete page 2 of IRS Form 8850 after the individual is hired.
- Complete ETA Form 9061.
- Submit the completed and signed IRS and ETA forms to the following address for Pennsylvania:
PA Dept of Labor & Industry
Tax Credit Services
651 Boas Street, 12th Floor
Harrisburg, Pa. 17121-0750
NOTE: Forms must be submitted within 28 calendar days of the new employee's start date. Proof of mailing may be required. Refer to ETA Handbook No. 408 and its Addendum for reference.
NOTE: Employers may submit applications electronically via www.cwds.pa.gov.
Please call the number below to gain website access and instructions on how to file electronically.
TAX CREDIT SERVICES