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WHAT IS THE
WORK OPPORTUNITY TAX CREDIT?
WHAT NEW HIRES CAN QUALIFY
EMPLOYERS FOR WOTC?
HOW CAN
EMPLOYERS APPLY FOR THE WOTC?
WHAT IS THE LONG
TERM TANF RECIPIENT TAX CREDIT?
STATE WOTC COORDINATOR LIST
FEDERAL INCOME TAX PREPARATION FORMS FOR WOTC
FEDERAL BONDING PROGRAM (FREE $5,000
FIDELITY BOND)
HOW CAN EMPLOYERS APPLY FOR THE WOTC?
Employers must apply for and receive certification from the Colorado
Department of Labor & Employment WOTC Unit, verifying that their new hire is
a member of a WOTC target group before they can claim the WOTC on their
federal tax return. To apply for WOTC certification, employers need only:
- Complete the
IRS Form 8850 page
1 and 2, (instructions for form 8850) "Pre-Screening Notice and
Certification Request" for the Work Opportunity Tax Credit.
- Complete the one-page U.S. Department of Labor
ETA Form 9061,"Individual Characteristics Form". At least one
target group must be selected.
Note: These forms are in Adobe Acrobat PDF format. Download the free
Acrobat Reader
Both forms must be included to be considered a complete application.
Claims received without all necessary forms and documentation will be
administratively denied until all necessary forms or documents are received.
The claims will then be processed. Colorado does not accept ETA Form
9062 "Conditional Certifications". All certifications are done by the State
WOTC office.
Mail the signed IRS 8850 and ETA 9061 forms with original signatures within
28 days of the new hire's start date. This proof must include a post mark
from the U.S. Postal Service falling not later than the 28th calendar day
following the individual's start date. Mail to:
Colorado Department of Labor & Employment
WOTC Unit
633 17th Street, Suite 700
Denver, CO 80202-3660
WHAT IS THE WORK OPPORTUNITY TAX CREDIT?
The Work Opportunity Tax Credit (WOTC) is a federal
income tax credit that encourages employers to hire eleven targeted groups of
job seekers who begin work before September 1, 2011. WOTC can reduce
employer federal tax liability by as much as $2,400 per new hire for
categories A, B-1, B-2, C, D, E, G, and H. Category I, Long Term TANF
recipient (formerly Welfare to Work), has a maximum value of $9,000 over a
two year period. Category B-2, Disabled Veteran, has a maximum value of
$4,800.
WOTC is one tool in a diverse toolbox of flexible strategies
designed to help job seekers most in need of employment gain on-the-job
experience and move towards economic self-sufficiency. This employer tax
incentive joins other employment program and targeted tax credit initiatives
aimed at helping American workers and increasing American productivity and
economic growth.
WHAT NEW
HIRES CAN QUALIFY EMPLOYERS FOR WOTC?
WOTC applies to new hires who begin work between January 1, 2006 and
August 31, 2011 and that belong to one of nine WOTC target groups:
- Category A
(Welfare Recipients) - Any individual who has received financial
benefits under the AFDC (Aid to Families with Dependent Children) or the
successor program, TANF (Temporary Aid to Needy Families). The employee
must have received at least any 9 months of benefits within an 18 month
period dating back from their hire date. If the employee has received
benefits from another state, identify that state on the form 9061
(Individual Characteristics Form) in block #17 or #21. Medicaid or
Medicare are not qualifying IV-A benefits. This tax credit for new hires
employed 400 or more hours is 40% of qualified wages for the first year
of employment; the credit for new hires employed 120 to 399 hours is
25%. Qualified wages are capped at $6,000.
- Category B-1 (Veteran Food Stamps) - - Veterans who are members of a
family that received food stamps for at least three consecutive months
during the 15 months prior to date of hire. Documentation such as the
Veterans DD 214 or other forms of official documentation is needed to
establish proof of service. This tax credit for new hires employed 400
or more hours is 40% of qualified wages for the first year of
employment; the credit for new hires employed 120 to 399 hours is 25%.
Qualified wages are capped at $6,000.
- Category B-2 (Disabled Veterans) – A veteran who is certified as
entitled to compensation for a service-connected disability of at least
10% and having a hire date which is not more than one year after having
been discharged or released from active duty in the Armed Forces of the
United States or having been unemployed for six months or more (whether
or not consecutive) during the one year period prior to the hire date. A
service-connected disability is defined as having a disability rating of
10 percent or higher according to Section 101 of Title 38, U.S.C.
Qualified first- year wages for this category are $12,000.
- Category C (Ex Felons) - An individual who has been convicted of a
felony and/or has been released from incarceration within the previous
12 months from date of hire. If the individual was sentenced directly to
probation, work release, community corrections without being
incarcerated, a letter from the case worker, parole officer, or halfway
house to document the status is required. Information can be added to
form 9061 in block 17 or 19 to assist in obtaining the required
documentation to certify the applicant. Date of birth is necessary for
this category. This tax credit for new hires employed 400 or more hours
is 40% of qualified wages for the first year of employment; the credit
for new hires employed 120 to 399 hours is 25%. Qualified wages are
capped at $6,000.
- Category D (Designated Community Residents-DCR) - A DCR is an
individual that is certified by the SWA/DLA as having attained the age
of 18 but not 40 on the hire date and his /her principal place of abode
is within an EZ, RC or Rural Renewal County (RRC). RRCs are defined as
any county that is outside a metropolitan statistical area (MSA) defined
as such by the OMB and had a net population loss during the five year
periods of 1990-1994 and 1995-1999. Colorado has three such counties
which are Cheyenne County, Kiowa County and San Juan County. This tax
credit for new hires employed 400 or more hours is 40% of qualified
wages for the first year of employment; the credit for new hires
employed 120 to 399 hours is 25%. Qualified wages are capped at $6,000.
- Category E (Vocational Rehabilitation) - Any person who is currently
receiving rehabilitative services, or has completed services within 2
years of the hire date. These individuals need to have an IWPE
(Individualized Written Plan of Employment) to support those services
rendered under the Rehabilitation act of 1973 or under Chapter 31 of
Title 38, U.S. Code. This now includes work plans that have been
developed and implemented through an Employment Network. This tax credit
for new hires employed 400 or more hours is 40% of qualified wages for
the first year of employment; the credit for new hires employed 120 to
399 hours is 25%. Qualified wages are capped at $6,000.
- Category G (Food Stamps) - Any individual who is 18 thru 39 years
old and is a member of a family that is receiving Food Stamps. The
recipient must have received 6 continuous months of benefits under the
Food Stamp Act of 1977 dating back from the hire date. In addition, the
recipient can qualify by being an able-bodied adult without dependents
if they received 3 continuous months of Food Stamps within the previous
5 months dating back from the hire date. If the new hire received
benefits in a state other than Colorado, indicate which state in box 17
or 19 on the ETA for 9061, Individual Characteristics Form. This tax
credit for new hires employed 400 or more hours is 40% of qualified
wages for the first year of employment; the credit for new hires
employed 120 to 399 hours is 25%. Qualified wages are capped at $6,000.
- Category H (SSI recipients) - Individuals who received Supplemental
Security Income benefits for any month during the 60 days prior to date
of hire. This tax credit for new hires employed 400 or more hours is 40%
of qualified wages for the first year of employment; the credit for new
hires employed 120 to 399 hours is 25%. Qualified wages are capped at
$6,000.
- Category I (Long Term TANF Recipients) - Formerly referred to as the
Welfare to Work Credit. This tax credit has merged under the WOTC Tax
Credit by Bill HR2206. Long Term TANF recipient who is a member of a
family that received Temporary Assistance for Needy Families (TANF) for
at least 18 consecutive months ending on the hire date, or a member of a
family whose TANF eligibility expired under Federal or State law after
August 5, 1997 and no more than 2 years before the hire date, or whose
family received TANF for any 18 months after August 5, 1997 and the 18th
month of benefits ended no more than 2 years before the hire date. The
tax credit for category I new hires employed 400 or more hours or 180
days is 40% of qualified wages for the first year of employment and 50%
for the second year. Qualified wages are capped at $10,000 per annum;
they include tax-exempt amounts received under accident or health plans
as well as educational assistance and dependent assistance programs.
- Category J (Unemployed Veterans) – Individuals who are certified as
1) having been discharged or released from active duty at any time
during the five-year period ending on the hiring date; and 2) being in
receipt of unemployment compensation under a state or federal law for
not less than four weeks during the one-year period ending on the hiring
date. The term veteran is defined in sec. 51(d)(3)(B)(i) as: (1) having
served on active duty for a period of more than 180 days; or (2) having
been discharged or release from active duty for a service-connected
disability. This tax credit for new hires employed 400 or more hours is
40% of qualified wages for the first year of employment; the credit for
new hires employed 120 to 399 hours is 25%. Qualified wages are capped
at $6,000.
- Category K (Disconnected Youth) – An individual who has 1) attained
age 16 but not age 25 on the hiring date; 2) not regularly attending any
secondary, technical, or post-secondary school during the six-month
period preceding the hiring date; 3) not regularly employed during such
six-month period; and 4) not readily employable by reason of lacking a
sufficient number of basic skills. This tax credit for new hires
employed 400 or more hours is 40% of qualified wages for the first year
of employment; the credit for new hires employed 120 to 399 hours is
25%. Qualified wages are capped at $6,000.
WHAT ARE THE IRS FORMS AND THE IRS INSTRUCTIONS THAT EMPLOYERS NEED FOR
FILING FEDERAL INCOME TAX RETURNS?
- The Work Opportunity Credit is calculated on Form
5884.
(The instructions are included with the form)
- You may need to file Form
3800
also, in order to claim credit. Form
3800
is the "General Business Credit" a type of summary form. Please
note that "Instructions
for Form 3800" are separate.
You can have the above forms mailed to you by calling 1-800-829-3676.
GOT A TAX QUESTION?
Tax Law Questions:
http://www.irs.gov/help/page/0,,id=13162,00.html
LINKS
ETA
Handbook No. 408 Third Edition, November 2002 WOTC
Handbook
http://www.uses.doleta.gov/pdf/ETA_HB_408_Text_11_2002.pdf
Tax related questions
should be directed to Robin Ehrenberg, IRS, Washington, D.C. phone
1-202-622-6080.
Information on
Colorado
Works Programs Credit. This program is not related to WOTC, it is
administered by the
Colorado
Department of Revenue. This link is provided for informational purposes
only. For further information please contact Richard Giardini
rgiardini@spike.dor.state.co.us 303-866-3900.
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