Expertise Beyond the Numbers

Act Now to Take Advantage of the Expanded Work Opportunity Tax Credit [Blog Post]

The following SC&H Group blog post discusses the nearing certification deadline for the Work Opportunity Tax Credit (WOTC), arming executives with information to achieve greater tax savings for their organization.

In today’s strict budgetary and competitive environment, leveraging all available tax credits is essential for organizations to reduce their tax bill, increase net assets, and meet short-and long-term objectives.

Such is the case with the Work Opportunity Tax Credit, which benefits employers who hire long-term unemployment recipients, certain veterans, recipients of various kinds of public assistance, and other workers who face significant barriers to employment.

The WOTC was extended last December by the Protecting Americans from Tax Hikes (PATH) Act. However, to take advantage of the credit for eligible workers hired between January 1, 2015 and August 31, 2016, your organization must meet the fast-approaching September 28, 2016 deadline for certification.

Assessing Eligible Employees

For employees hired on or after January 1, 2015, the PATH Act outlined nine categories of eligible workers:

  • Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
  • Unemployed veterans, including disabled veterans
  • Ex-felons
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties
  • Vocational rehabilitation referrals
  • Summer youth employees living in Empowerment Zones
  • Food stamp recipients
  • Supplemental Security Income (SSI) recipients
  • Long-term family assistance recipients

Also, the legislation added a tenth category for qualified long-term unemployment recipients hired on or after January 1, 2016. These workers must have been unemployed for at least 27 weeks and received state or federal unemployment benefits during part or all of that time.

Qualifying for the Credit

Normally, organizations would have to first request certification by filing IRS Form 8850 with the state workforce agency within 28 days after the eligible workers begin work.

Now, due to the late enactment and impact of the legislation extending the WOTC, the IRS is giving organizations until the September 28 deadline to make requests related to eligible workers hired any time in 2015 and during the first eight months of 2016.

However, the 28-day rule will apply for any eligible worker hired after August 31, 2016.

Also, eligible businesses can claim the WOTC on their income tax return. The credit is first figured on Form 5884, then claimed on Form 3800 as part of their general business credit. Although the credit is unavailable to tax-exempt organizations, a special rule allows them to get the WOTC for hiring qualified veterans. These organizations can claim the credit on Form 5884-C.

If you’d like to speak with SC&H Group’s tax specialists about how they can help your organization claim the WOTC, or any other tax credits, contact us here.