With the passing of the Further Consolidated Appropriation ACT of 2021, the Work Opportunity Tax Credit was extended from December 31, 2020 through December31, 2025. These credits are based on hiring certain targeted individuals including veterans and those who receive food stamps. The tax benefits are significant – the typical yield is a $2,400 credit for most of the targeted individuals but can grow to up to $9,600 in certain cases. You can access the list of employees who are eligible for the tax credit here: https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit. The challenge with these credits is that you need to identify the qualified individuals at the time you hire, and you are only given 28 days from the time of hiring to get them certified with your State Workforce Agency. In addition to being certified the employee must compete 120 hours of to receive the credit
A newly hired employee can be certified under one of the following methods:
- By the day the individual begins work, the employer has received certification from the State Workforce Agency (SWA), formerly known as State Employment Security Agency, (i.e. the Arizona DES) that the individual is a member of a targeted group, or
- The employer completes a Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit on or before the day the individual is offered a job and submits the Form 8850 to the SWA by the 28th calendar day after the individual begins work.
Additionally, under the CARES Act of 2020 employers became eligible to apply for the Employee Retention Credit. As the name states this credit was an incentive to retain employees during the period of March 12, 2020 through January 1, 2021. However, any employees that are covered under the Employee Retention Credit during this period cannot be considered for the Work Opportunity Tax Credit.