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WHAT IS THE
WORK OPPORTUNITY TAX CREDIT?
WHAT NEW HIRES CAN QUALIFY
EMPLOYERS FOR WOTC?
HOW CAN
EMPLOYERS PARTICIPATE IN THE WOTC?
FORMS TO APPLY FOR A TAX CREDIT
WHAT IS THE LONG
TERM TANF RECIPIENT TAX CREDIT?
STATE WOTC COORDINATOR LIST
TAX PREPARATION FORMS FOR WOTC
FEDERAL BONDING PROGRAM (FREE $5,000
FIDELITY BOND)
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print these forms.
- Complete the
IRS Form 8850,
(instructions for form 8850)
"Pre-Screening Notice and Certification Request for the Work Opportunity
and Welfare-to-Work Tax Credits," by the date the job offer is made, and
- Complete the U.S. Department of Labor-
ETA Form 9061,"Individual Characteristics Form",
- Mail the signed IRS 8850 and ETA 9061 forms to the
Colorado Department of Labor & Employment WOTC Unit. The original IRS 8850
must be mailed within 28 days of the new hire's start date 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 seven 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 eight 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) - An expansion of the Veterans
targeted group which includes a Veteran who is certified as entitled to
compensation for a service-connected disability 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 eceiving 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.
HOW CAN EMPLOYERS PARTICIPATE IN 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, (instructions
for form 8850) "Pre-Screening Notice and Certification Request" for the Work
Opportunity Tax Credit and complete the one-page U.S. Department of Labor ETA
Form 9061, "Individual Characteristics Form".
- Colorado does not accept ETA Form 9062 "Conditional
Certifications". All certifications are done by the State WOTC office.
The IRS forms with original signatures must be
mailed 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.
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.
WHAT ARE THE IRS FORMS AND THE IRS INSTRUCTIONS THAT EMPLOYERS NEED FOR
FILING INCOME TAX RETURNS?
- The Work Opportunity Credit is claimed 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 may obtain our forms and instructions at www.irs.gov
or you can have them 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
U.S. Department of Labor
National WOTC Web Site at:
http://www.uses.doleta.gov/tax.asp
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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