"Employer's Guide to the Work Opportunity Pportunity Tax Credit"

Employer's Guide to the Work Opportunity Pportunity Tax Credit is a 9-page legal document that was released by the U.S. Department of Labor - Employment & Training Administration on August 1, 2014 and used nation-wide.

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WHAT IS WOTC?
The
Work Opportunity Tax Credit (WOTC)
is a federal tax credit available to employers who hire
individuals from eligible target groups with significant barriers to employment. Each year, employers
claim over $1 billion in tax credits under the WOTC program. The information contained in this guide
will assist you in applying for and obtaining the tax credit.
Potential For Reduced Tax Liability
Employers hiring target group employees may be eligible to
reduce their federal income tax liability by as much as $9,600
per employee hired.
Employers Make the Hiring Decision
WOTC reduces an employer’s cost of doing business and
requires little paperwork, while helping those in need to find
and retain good jobs.
The U.S. Economy Benefits
The success and growth of this income tax credit for private-
sector business is beneficial for all who participate, while
increasing America’s economic growth and productivity.
HOW DOES WOTC WORK?
Any private sector business that hires a new employee from an eligible target group may apply for
WOTC. In addition, the tax credit is available to certain tax-exempt organizations that hire new
employees from the WOTC veterans target group.
To apply, employers complete and submit the required WOTC forms outlined in the simple step-by-
step process described in this guide.
There is no limit on the number of individuals an employer can
hire in order to qualify to claim the tax credit. For additional information and resources on WOTC, visit
www.doleta.gov/wotc.
Employer’s Guide to the Work Opportunity Tax Credit
July 2014
U.S. Department of Labor, Employment and Training Administration
2
WHO IS ELIGIBLE?
WOTC Target Groups
Veteran
To be considered a veteran eligible for WOTC, an individual must meet these two standards:
1. Have served on active duty (not including training) in the U.S. Armed Forces for more than
180 days or have been discharged or released from active duty for a service-connected
disability; AND
2. Cannot have a period of active duty (not including training) of more than 90 days that
ended during the 60-day period ending on the hiring date.
To be eligible for WOTC, a veteran must also be one of the following:
A member of a family that received Supplemental Nutrition Assistance Program benefits
(food stamps) for at least 3-months during the 15-month period ending on the hiring date;
OR
Entitled to compensation for a service-connected disability and was:
o Hired within 1 year of discharge or release from active duty, or
o Unemployed for at least 6 months in the year ending on the hiring date; OR
Unemployed for:
o At least 4 weeks (but less than 6 months) in the year ending on the hiring date, or
o At least 6 months in the year ending on the hiring date.
Long-Term or
Short-term Temporary Assistance for Needy Families (TANF) Recipient – An individual who is a
member of a family that:
Short-Term
Received TANF benefits for any 9 months during the 18-month period ending on the
Temporary
hiring date.
Assistance for
Needy Families
Long-term TANF Recipient – An individual who is a member of a family that meets one of the
Recipient
following:
Received TANF benefits for at least 18 consecutive months ending on the hiring date; OR
Stopped being eligible for TANF payments during the past 2 years because a Federal or
state law limited the maximum time those payments could be made, and the individual is
hired not more than 2 years after such eligibility ended; OR
Received TANF benefits for any 18 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.
Supplemental
A Supplemental Nutrition Assistance Program (SNAP) recipient age 18-39 years who is a member
of a family that received SNAP benefits (food stamps) for:
Nutrition
The 6-month period ending on the hiring date; OR
Assistance
At least 3 of the 5 months ending on the hiring date, in the case of a family member who
Program Recipient
ceased to be eligible for such assistance under Section 6(o) of the Food Stamp Act of
(Food Stamps)
1977.
Designated
An 18-39 year old who lives within one of the federally-designated Rural Renewal Counties or
Empowerment Zones. For additional information on Rural Renewal Counties or Empowerment
Community
Zones, please visit:
Resident
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/economicdevelopm
ent/programs/rc.
A listing of current Empowerment Zones (EZs) can be found at:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/economicdevelopm
ent/programs/rc/ezcontacts.
http://egis.hud.gov/ezrclocator/.
To locate Empowerment Zones, visit the EZ Locator at:
Employer’s Guide to the Work Opportunity Tax Credit
July 2014
U.S. Department of Labor, Employment and Training Administration
3
Vocational
An individual with a disability who completed or is completing rehabilitative services from a state-
certified agency, an Employment Network under the Ticket to Work program, or the U.S.
Rehabilitation
Department of Veteran Affairs.
Referral
Ex-Felon
An individual who:
Has been convicted of a felony; AND
Who is hired within 1 year after the conviction or release date from prison.
Supplemental
An individual who received Supplemental Security Income (SSI) benefits for any month that ended
during the 60-day period ending on the hire date.
Security Income
Recipient
Summer Youth
A 16 or 17 year-old youth who:
st
th
Employee
Works for the employer between May 1
and September 15
; AND
Lives within one of the federally-designated Empowerment Zones.
For additional information on Rural Renewal Counties or Empowerment Zones, please visit:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/economicdevelopm
ent/programs/rc.
A listing of current Empowerment Zones (EZs) can be found at:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/economicdevelopm
ent/programs/rc/ezcontacts.
To locate Empowerment Zones, visit the EZ Locator at:
http://egis.hud.gov/ezrclocator/.
Some employees do not qualify the employer for the WOTC. They include:
Relatives and dependents of the employer, including sons, daughters, stepchildren, spouses,
fathers, mothers, brothers, sisters, step-brothers or sisters, nephews, nieces, uncles, aunts,
cousins, or in-laws.
Former employees, regardless of how long it has been since he/she last worked for the employer.
Majority owners of the business.
HOW TO CALCULATE THE TAX CREDIT
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. There is also a maximum tax credit that can be earned for each target group.
Employees must work at least 120 hours in the first year of employment for the employer to qualify to
claim the tax credit with the Internal Revenue Service (IRS). The tax credit is generally calculated as
follows; however, please refer to the chart on the following page for full details.
After Working at Least 120 Hours
The employer may claim a tax credit equal to 25% of the new hire's first year of qualified
wages. The maximum tax credit on first year wages is between $750 and $6,000, depending on
the eligible target group.
Employer’s Guide to the Work Opportunity Tax Credit
July 2014
U.S. Department of Labor, Employment and Training Administration
4
After Working at Least 400 Hours
The employer may claim a tax credit equal to 40% of the new hire's first year of wages. The
maximum tax credit on first year wages is between $1,200 and $9,600, depending on the
eligible target group.
For the Long-term Temporary Assistance for Needy Families (TANF) Recipient target group, the
credit is also available to employers in the second year of employment. The employer may claim a tax
credit equal to 50% of second year wages, up to the maximum tax credit of $5,000.
MAXIMUM TAX CREDIT AMOUNTS
Worked at least 120 hours but
Veteran Target Group
Worked at least 400 hours
less than 400 hours
Receives SNAP (food stamps)
Up to $1,500
Up to $2,400
benefits
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Entitled to compensation for service-connected disability:
Up to $3,000
Up to $4,800
Hired 1 year after leaving service
(25% of $12,000 of first-year wages)
(40% of $12,000 of first-year wages)
Unemployed at least 6 months
Up to $6,000
Up to $9,600
(25% of $24,000 of first-year wages)
(40% of $24,000 of first-year wages)
Unemployed:
At least 4 weeks
Up to $1,500
Up to $ 2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
At least 6 months
Up to $ 3,500
Up to $5,600
(25% of $14,000 of first-year wages)
(40% of $14,000 of first-year wages)
Worked at least 120 hours but
Other WOTC Target Groups
Worked at least 400 hours
less than 400 hours
Short-Term TANF Recipient
Up to $1,500
Up to $2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Long-Term TANF Recipient
N/A
Up to $9,000
(over 2 years)
(40% of $10,000 of first-year wages and
50% of $10,000 of second-year wages)
Up to $1,500
Up to $2,400
SNAP (food stamp) Recipient
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Designated Community Resident
Up to $1,500
Up to $2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Vocational Rehabilitation Referral
Up to $1,500
Up to $2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Ex-Felon
Up to $1,500
Up to $2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
SSI Recipient
Up to $1,500
Up to $2,400
(25% of $6,000 of first-year wages)
(40% of $6,000 of first-year wages)
Summer Youth Employee
Up to $750
Up to $1,200
(25% of $3,000 of first-year wages)
(40% of $3,000 of first-year wages)
Employer’s Guide to the Work Opportunity Tax Credit
July 2014
U.S. Department of Labor, Employment and Training Administration
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