Work Opportunity Tax Credits

Must Act Fast!

The recent Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) retroactively extended the expiring Work Opportunity Tax Credits (WOTC) credits from January 1, 2015 through December 31, 2019. These credits are based on hiring certain targeted individuals including veterans, those that receive food stamps, and those who live in “empowerment” zones. The credits are fairly beneficial, typically yielding a $2,400 credit for most of the targeted individuals but can grow to up to $9,600 in certain cases. The challenge with these credits is that you need to identify the qualified individuals at the time you hire, and normally they only give you up to 28 days from the time of hiring to get them certified with the Department of Economic Security. You can access the list of employees who are eligible for the tax credit here: https://www.doleta.gov/business/incentives/opptax/eligible.cfm

The PATH Act also introduced a new target group, the Qualified Long-term Unemployment Recipients. The code defines a qualified long-term unemployment recipient as any individual who is certified by the Arizona Department of Economic Security (DES) as being in a period of unemployment which is not less than 27 consecutive weeks and includes a period in which the individual was receiving unemployment compensation.

Employees Must Be Certified. In general, under the WOTC rules, an individual isn’t treated as a member of a targeted group unless:

  1. By the day the individual begins work, the employer has received certification from the State Employment Security Agency (SESA – i.e. the Arizona DES) that the individual is a member of a targeted group, or
  2. 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 SESA by the 28th calendar day after the individual begins work.

At this stage, we have no indication as to whether Congress will extend this tax credit past December 31, 2019, so employers need to act fast to add Form 8850 to their employee new hire packet and get them certified with the state!

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Jon Bickerton
Jon Bickerton

Jon Bickerton is a Tax Shareholder and a member of the firm’s Science & Manufacturing, and Cost Segregation Segment Teams. He has over 10 years of public accounting experience managing many of the firm’s privately-held and not-for-profit tax engagements.