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Work Opportunity Tax CreditThe Work Opportunity Tax Credit (“WOTC”) is a federal tax credit available to employers for hiring individuals from certain target groups.

  • Unemployed Veterans
  • Long-Term Temporary Assistance for Needy Families (TANF) Recipient
  • Short-Term TANF Recipient
  • Supplemental Nutrition Assistance Program (SNAP) Recipient
  • Designated Community Resident
  • Vocational Rehabilitation Referred Individual
  • Ex-Felon
  • Supplemental Security Income (SSI) Recipient
  • Summer Youth Employee
  • Qualified Long-Term Unemployment Recipient

The amount of the tax credit that employers can claim depends on the target group of the individual hired, the wages paid to that individual and the number of hours that individual worked during the first year of employment. The WOTC only applies to new employees. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit.

For the long-term TANF target group, the credit is available to employers through the second year of employment after the employee works at least 400 hours. The employer may claim a tax credit equal to $9,000 total over a two-year period, as follows:

    • 40% of first year wages, up to the maximum credit of $4,000 and
    • 50% of second year wages, up to the maximum credit of $5,000.

For all other target groups, the credit is available to employers in the first year of employment and is calculated as follows:

  • After working at least 120 hours in their first year of employment, an employer may claim a tax credit equal to 25% of the new hire’s first year of qualified wages, up to the maximum tax credit for the target group.
  • After working at least 400 hours in their first year of employment, an employer may claim a tax credit equal to $40% of the new hire’s first year of wages, up to the maximum tax credit for the target group.

The credit is limited to the amount of the business income tax liability or social security tax owed. To claim the credit, an employer must first obtain certification that an individual is a member of the targeted group. This is done by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after the eligible worker begins work. Once this certification is secured, the employer may claim the tax credit as a general business credit on Form 3800 against their income tax by filing Form 5884, Form 3800, and the business’ related income tax return.

There is a maximum tax credit that can be earned for each target group.

Requirements Maximum Tax Credit
Unemployed Veterans
Veteran who is either:

  1. Member of a family that received SNAP benefits (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date; or
  1. Disabled veteran entitled to compensation for a service-related disability who is hired within 1 year of discharge from military or unemployed for at least 6 months in the year ending on the hiring date; or
  1. Unemployed for at least 4 weeks in the year ending on the hiring date or at least 6 months in the year ending on the hiring date.
If employee works more than 120 hours but less than 400 hours:

  • Receives SNAP benefits = $1,500
  • Disabled veteran hired within 1 year of discharge = $3,000
  • Disabled veteran unemployed at least 6 months = $6,000
  • Unemployed at least 4 weeks = $1,500
  • Unemployed at least 6 months = $3,500

If employee works at least 400 hours:

  • Receives SNAP benefits = $2,400
  • Disabled veteran hired within 1 year of discharge = $4,800
  • Disabled veteran unemployed at least 6 months = $9,600
  • Unemployed at least 4 weeks = $2,400
  • Unemployed at least 6 months = $5,600
Long-Term Temporary Assistance for Needy Families (TANF) Recipient
Person who has either:

  1. Received TANF benefits for at least 18 consecutive months ending on the hiring date; or
  1. Received TANF benefits for at least 18 consecutive or non-consecutive months after August 5, 1997 and has a hiring date that is not more than 2 years after the end of the earliest 18 month period after August 5, 1997; or
  1. Has stopped being eligible for TANF payments during the last 2 years because a federal or state law limited the maximum time payments could be made.
If employee works more than 120 hours but less than 400 hours:

N/A

If employee works at least 400 hours:

$9,000 (over 2 years – see below)

Short-Term TANF Recipient
Person who has received TANF benefits for any 9-month period during the 18-month period ending on the hiring date. If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours: $2,400

Supplemental Nutrition Assistance Program (SNAP) Recipient
Person who is:

  1. 18-39 and
  1. Received SNAP benefits for the 6 months ending on the hiring date or at least 3 of the 5 months ending on the hiring date.
If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours:

$2,400

Designated Community Resident
Person who is:

  1. 18-39 and
  1. Resides within one of the federal designated rural renewal counties or empowerment zones.
If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours:

$2,400

Vocational Rehabilitation Referred Individual
Individual with a disability who has completed rehabilitative services provided by a state-certified agency, employment network under the Ticket to Work program or the U.S. Department of Veteran Affairs. If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours:

$2,400

Ex-Felon
Individual who has been convicted of a felony and has a hiring date of not more than 1 year after conviction or release from prison. If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours: $2,400

Supplemental Security Income (SSI) Recipient
Individual who is the recipient of SSI benefits for any month that ends during the 60-day period ending on the hire date. If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours:

$2,400

Summer Youth Employee
Individual who is:

  1. 16-17, and
  2. Works for the employer between May 1 – September 15, and
  1. Resides in an empowerment zone.
If employee works more than 120 hours but less than 400 hours: $750

If employee works at least 400 hours:

$1,200

Qualified Long-Term Unemployment Recipient
Individual who has been unemployed for not less than 27 consecutive weeks and includes a period in which the individual received unemployment compensation under state or federal law. If employee works more than 120 hours but less than 400 hours: $1,500

If employee works at least 400 hours:

$2,400

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