WOTC Deadlines 2016

The Work Opportunity Tax Credit (WOTC) saves businesses tens of thousands of dollars annually — and this year, the IRS has granted taxpayers a special chance to claim the credit for employees hired between January 1, 2015 and August 31, 2016.  The IRS recently issued Notice 2016-40 extending the deadline for filing the requisite paperwork through September 28.
Designed to help pave a path to financial independence for job-seekers who have traditionally faced barriers to employment, WOTC provides employers with a tax credit ranging from $1,200 to $9,600 for each applicant hired from a target group.  These target groups include:

  • Veterans
  • Recipients of Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), or Supplemental Security Income
  • Residents of federally designated Empowerment Zones or Rural Renewal Counties
  • Ex-felons
  • Participants in vocational rehabilitation programs
  • Summer youth employees who live in Empowerment Zones
  • Long-term recipients of unemployment who were hired on or after January 1, 2016

The Department of Labor’s website offers more information regarding the specific criteria that job applicants must meet in order to qualify as members of a target group.  The credit amount to which businesses are entitled depends on the qualifying employee’s target group and the number of hours that the new employee has worked.
Long-term unemployment recipients were added under WOTC by the Protecting Americans from Tax Hikes (PATH) Act of 2015.  To qualify for this category, workers must have been unemployed for a minimum of 27 consecutive weeks and must have received state or federal unemployment benefits for part of that time.  The PATH Act also extended WOTC retroactively for the 2015 tax year and through 2019.  This measure will provide stability for businesses as they formulate hiring strategies for the next few years.
Typically, the procedure for claiming WOTC requires employers to file IRS Form 8850, Pre-Screening Notice and Certification Request, no later than 28 days after an eligible new hire begins work.  However, because WOTC was not in effect during 2015 until the PATH Act retroactively renewed it, the IRS has allowed businesses to file Form 8850 until September 28, 2016 for employees hired between January 1, 2015 and August 31, 2016.  This extension grants businesses the rare opportunity to review hiring decisions made during the previous year and seize the tax savings offered by WOTC for eligible hires.  For employees hired on or after September 1, businesses must comply with the standard 28-day deadline.
Creative Business Resources can help your business determine WOTC eligibility and file the paperwork required to claim this valuable tax credit.  Our process involves the following simple steps:

  • Have employees hired between January 1, 2015 and August 31, 2016 complete Form 8850.
  • Send the forms to CBR for a preliminary analysis. We will notify you if we need additional documentation.
  • CBR will submit all paperwork to the designated State Workforce Agency by the September 28 deadline.

Timeliness is critical for businesses seeking to take advantage of the expanded opportunities for WOTC created by the PATH Act.  Contact CBR today to begin the process of reducing your tax burden as you grow your workforce!
(Sources: https://www.doleta.gov/business/incentives/opptax/eligible.cfm, https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit-1, https://www.irs.gov/pub/irs-drop/n-16-40.pdf).