The IRS recently updated information on the the pre-screening and certification process for Work Opportunity Tax Credit (WOTC), available to employers that hire designated categories of workers who face significant barriers to employment. For employers facing a tight job market, the WOTC may be able to help.
To satisfy the requirement to pre-screen a job applicant, on or before the day a job offer is made, a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) must be completed by the job applicant and the employer.
After pre-screening a job applicant, the employer must then request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Other requirements and further details can be found in the instructions to Form 8850.
WOTC has 10 designated categories of workers. The 10 categories are:
- Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
- Certain veterans, including unemployed or disabled veterans
- The formerly incarcerated or those previously convicted of a felony
- Designated community residents living in Empowerment Zones or Rural Renewal Counties
- Vocational rehabilitation referrals
- Summer youth employees living in Empowerment Zones
- Food stamp (SNAP) recipients
- Supplemental Security Income (SSI) recipients
- Long-term family assistance recipients
- Qualified long-term unemployment recipients.
Although the credit generally is not available to tax-exempt organizations, a special provision allows them to claim the WOTC against the employer’s share of Social Security tax for hiring qualified veterans. These organizations claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Visit the WOTC page on IRS.gov for more information.
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