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Work Opportunity Tax Credit

   

 

What is the purpose of this resource?

The Department of Career Services (DCS) oversees a number of labor and workforce development programs including the Work Opportunity Tax Credit (WOTC) program. WOTC is a federal income tax credit incentive provided to private sector employers. An employer may be eligible for WOTC when they hire and retain veterans and individuals from other target groups with significant barriers to employment. The WOTC tax credit is a one‐time tax credit for each new hire – and there is no limit to the number of new hires who can qualify an employer for a tax credit. The requirements for this program are set by the Internal Revenue Service and the U.S. Department of Labor, Employment and Training Administration. Employers claim about $1 billion in tax credits each year under the

WOTC program.

 

What benefits or services are offered by this resource to employers?

The tax credit employers can claim depends on the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. The maximum tax credit for each target group ranges from $1,200 to $9,600, depending on the employee hired.

- If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual’s first year wages, up to the maximum tax credit.

- If the individual works at least 400 hours, the employer may claim a tax credit equal to
40% of the individual’s first year wages, up to the maximum tax credit.

 

Only for the Long term Temporary Assistance for Needy Families (TANF) target group, the credit is available to employers who hire members of this group for a two‐year period.

- In the first year, employers may claim a tax credit equal to:

- 25% of the first‐year wages, up to the maximum tax credit, if the individual works at
least 120 hours.

- 40% of the first‐year wages, up to the maximum tax credit, if the individual works at
least 400 hours.

- In the second year, employers may claim a tax credit equal to:

- 25% of the second‐year wages, up to the maximum tax credit, if the individual works
at least 120 hours.

- 50% of the second‐year wages, up to the maximum tax credit, if the individual works
at least 400 hours.

 

Who is eligible for these benefits and services?

Businesses that hire individuals from these target groups:

Veterans,

TANF Recipients,

SNAP (Food Stamp) Recipients,

Designated Community Residents (living in Empowerment Zones/Rural Renewal Counties),

Vocational Rehabilitation Referral,

Ex‐felons,

Supplemental Security Income Recipients, or

Summer Youth Employee (living in Empowerment Zones).

WOTC policies and requirements include:

Not retroactive for current Employees.

Must be “New” Employee ‐ Not a Rehire.

Time sensitive ‐ 28 Days from start date.

 

Target Group Eligibility Definitions:

 

A veteran who is:

  • A member of a family that received SNAP benefits (Food Stamps) for at least a3‐month period during the 15‐month period ending on the hiring date.

 

  • Entitled to compensation for a service‐connected disability:
    • Hired within 1 year of discharge or release from active duty.
    • Unemployed at least 6 months in the year ending on the hiring date.

  •  Unemployed:
    • At least 4 weeks in the year ending on the hiring date.
    • At least 6 months in the year ending on the hiring date.

 

Please note that to be considered a veteran eligible for WOTC, an individual must meet these two standards:

 

  • Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service‐connected disability.

 

  • Not have a period of active duty (not including training) of more than 90 days that ended during the 60‐day period ending on the hiring date.

Long‐term Temporary Assistance for Needy Families (TANF) Recipient:


A member of a family that meets one of the following circumstances:

  • Received TANF benefits for at least 18 consecutive months ending on the hiring date.

  • Received TANF benefits for at least 18 consecutive or non‐consecutive months after August 5, 1997, and has a hiring date that is not more than 2 years after the end of the earliest 18‐month period after August 5, 1997.

  • Stopped being eligible for TANF payments during the past 2 years because a federal or state law limited the maximum time those payments could be made.ing and Hiring


Short‐term TANF Recipient:
- A member of a family that received TANF benefits for any 9‐month period during the
18‐month period ending on the hiring date.

SNAP (Food Stamp) Recipient:
- An 18‐39 year old member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for the 6 months ending on the hiring date or received SNAP benefits for at least 3 of the 5 months ending on the hiring date.


Designated Community Resident:
- An 18‐39 year old who lives within one of the federally designated Rural Renewal Counties or Empowerment Zones.


Vocational Rehabilitation Referral:
- An individual with a disability who completed or is completing rehabilitative services from
a state‐certified agency, an Employment Network under the Ticket to Work program, or
the U.S. Department of Veteran Affairs.

Ex‐felon:
- An individual who has been convicted of a felony and has a hiring date that is not more
than 1 year after the conviction or release from prison.

 

   

You may be eligible for this federal tax credit

 

 

To find out how you qualify, contact a Business Service Representative before you hire and for additional information

 


 

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