What is the WOTC Tax Credit Program?
Employer tax credits are an important part of the diverse strategies designed to help people gain on-the-job experience and acquire better employment. The Work Opportunity Tax Credit (WOTC) program offers federal tax credits to employers as an incentive to hire people in several specific target groups.
Who is helped by the WOTC Tax Credit?
WOTC helps both employers and targeted job seekers. Employers save as tax credits help defray payroll expenses. Job seekers qualifying as a member of one of the targeted groups gain an advantage in the job market.
How much is the Tax Credit?
FOR THE TARGET GROUP A, C, D, E, G AND H, J and K
The tax credit is calculated at the rate of 25% of the qualified first-year wages up to $6,000 for employees working at least 120 hours, but less than 400 hours. This allows a maximum credit amount of $1,500. For employees working at least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first year wages up to $6,000. This allows a maximum credit amount of $2,400.
FOR THE TARGET GROUP B (Veteran)
For Veteran’s receiving food stamps only, the tax credit is calculated at the rate of 25% of the qualified first-year wages up to $6,000 for employees working at least 120 hours but less than 400 hours. This allows a maximum credit of $1,500. For employees working at least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first-year wages up to $6,000. This allows a maximum credit of $2,400.
The tax credit is calculated at the rate of 25% of the qualified first-year wages for the New Disabled Veteran group up to $12,000 for employees working at least 120 hours, but less than 400 hours. This allows a maximum credit amount of $3,000. For employees working at least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first year wages up to $12,000. This allows a maximum credit amount of $4,800.
FOR THE TARGET GROUP F (Summer Youth)
An individual hired as a Summer Youth employee between May 1 and September 15.
The tax credit for this target group is calculated at the rate of 25% of qualified first-year wages up to $3,000 for employees working at least 120 hours, but less than 400 hours. This allows a maximum credit of $750. For employees working at least 400 hours or more, the credit is calculated at the rate of 40% of the qualified first-year wages up to $3,000. This allows a maximum credit amount of $1,200.
FOR THE TARGET GROUP I (Long Term TANF)
For qualified first-year wages which begins the day the employee starts work, the maximum amount of wages to which the 40% tax credit may be applied during the first year shall not exceed $10,000 for a maximum first year credit of $4,000. For qualified second-year wages, the maximum amount of wages to which the 50% may be applied shall not exceed $10,000 for a maximum credit of $5,000. Under category I, employers can claim up to $9,000 of combined tax savings per new hire.
Who are the Targeted Groups?
WOTC Target Groups:
A) Qualified IV-A Recipients---
A member of a family that received TANF for any 9-month period of the 18 months
ending on the hiring date.
B) Veteran—A veteran who is any of the following:
· a member of a family receiving assistance under the Food Stamp program for at least a 3-month period ending during the 15 month period ending on the hiring date,
· Entitled to compensation for a service-connected disability and is hired not more than 1 year after having been discharged or released from active duty in the Armed Forces of the United States,
· Entitled to compensation for a service connected disability and was unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.
To be considered a Veteran, the applicant must:
· Have served on active duty (not including training) in the Armed Forces of the United States for more than 180 days or have been discharged or released from active duty for a service connected disability, and
· Not 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.
NEW EXPANSION TO THE VETERAN CATEGORY FOR THOSE HIRED AFTER 2008 BUT BEFORE 2011
Unemployed Veteran (TARGET GROUP J)
· Having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and
· Being in receipt of unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.
C) Ex-felon---An individual convicted of a felony hired within one year of conviction date or release from prison.
D) 18-39 Year-Old EZ/EC/RC Resident---
An individual who lives in a federally designated Empowerment Zone, Enterprise
Community or Renewal Community. (Vermont’s Renewal area is in Burlington)
Please note that the Renewal Community designation is currently expired as of the end of December 2009
E) Vocational Rehabilitation Referral---A person with a disability who completed or is completing rehabilitative services approved by a State certified agency or the U.S.
Dept. of Veteran's Affairs.
F) 16-17 Year-Old EZ/EC/RC* Resident--- (Vermont’s Renewal area is in Burlington)
Please note that the Renewal Community designation is currently expired as of the end of December 2009
G) 18-39 Year-Old Food Stamp Recipient---
A member of a family that received food stamps for at least the last 6 months ending
on the hiring date, or for at least 3 of the 5 months ending on date of hire in
case of a family member who ceases to be eligible for such public assistance.
H) SSI Recipient--An individual who received Supplemental Security Income
benefits for any month during the 60 days ending on date of hire.
I) Long-term Family Assistance Recipient---
A member of a family that received Temporary Assistance for Needy Families (TANF)
for at least 18 consecutive months ending on the hiring date, or a member of a family whose TANF eligibility expired under federal or state law after August 5, 1997, or whose family received TANF for at least 18 months after August 5, 1997. See "Welfare-To-Work Tax Credit".
(K) NEW DISCONNECTEED YOUTH CATEGORY FOR THOSE HIRED AFTER 2008 BUT BEFORE 2011
(Please note that all WOTC requests for the disconnected youth category must include a self attestation form.)
Disconnected Youth is any individual who is certified by the designated local agency:
· As having attained age 16 but not yet age 25 on the hiring date:
· As not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date;
· As not regularly employed during such 6-month period; and
· As not readily employable by reason of lacking a sufficient number of basic skills.
Who Doesn't Qualify?
- Employers may not claim the credit for former employees, regardless of how long it has been since the employee last worked for them.
- Employers may not claim the credit for family members or relatives.
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WOTC Instructions for Vermont employers |
What Steps Do Employers Need To Take To Earn These Tax Credits?
Employers must apply and receive certification from the Vermont Department of Labor that their newly hired employee belongs to one of the target groups eligible for the Work Opportunity Tax Credit before claiming credit on their federal income tax return. Form 8850 must be postmarked within 28 calendar days of the date the applicant starts work.
Only three steps to apply for WOTC certification for a new employee:
1) Complete Form 8850, "Pre-Screening Notice and Certification Request for Work Opportunity and Welfare-to-Work Credits".
a) Have all job applicants complete page one of Form 8850. Make sure applicants sign the forms.
b) Employers should complete page two of Form 8850 if the job applicant is hired and has checked box 1, 2, 3, or 4 on the first page of the form.
2) Complete the following Vermont Department of Labor form:
Form ETA-9061: Complete ETA-Form 9061, "Individual Characteristics Form. Mail both forms to:
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Vermont Department of Labor
WOTC Coordinator
P.O. Box 488
Montpelier, VT 05601 |
(If applying for the disconnected youth target group, a self attestation form available at http://www.doleta.gov/business/incentives/opptax/ must be completed and mailed with the above forms)
Form 8850 must be postmarked within 28 days of the date the applicant starts work. Form 8850 cannot be accepted by fax or email.
What is a Certification?
Form ETA-9063, "WOTC Certification," is sent to employers verifying that an applicant is WOTC eligible and may qualify the employer for the federal tax credit. This form should be retained for the employer's IRS records.
How does an Employer obtain the Tax Credit?
Employers use IRS Form 5884, "Work Opportunity Credit," to claim their WOTC tax credit. Form 5884 is filed with employer's federal income tax return.
How to get Forms
- Please use the most current attached PDF Forms dated August 2009
**As of October 17, 2009, 8850 and 9061 forms dated earlier than August 2009 will not meet IRS requirements
http://www.irs.gov/
- Visit your local Career Resource Center
For Additional Information:
Judy Bourbeau
Vermont WOTC Coordinator
PO Box 488
Montpelier, VT 05601
802-828-5250
judy.bourbeau@state.vt.us