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W.O.T.C. PROGRAM
Work Opportunity Tax Credit
U.S.
Department of Labor Employment & Training Administration Directing business,
adults, youth, dislocated workers, and workforce professionals to training and
employment services ...www.uses.doleta.gov/wotcdata.asp
Tax Credit
Programs
The Work Opportunity and Welfare-to-Work Tax Credits:
The Work Opportunity Tax Credit (WOTC) created in 1996 and the Welfare-to-Work
Tax Credit (WtWTC) created in 1997, are incentives that the Congress provides to
private-sector employers for hiring economically disadvantaged individuals with
significant barriers to employment,
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the credits are applied to taxes due to the Internal Revenue
Service, and unused tax credits may be carried over to the next tax year.
Welfare-to-Work Tax Credit
WHAT IS THE WORK OPPORTUNITY TAX CREDIT?
The WOTC is one tool in a diverse toolbox of flexible strategies designed to
help move people from welfare into gainful employment and obtain on-the-job
experience. It joins other tax credits, education, and job training programs
that help American workers with barriers to employment prepare for good jobs;
ease their transition from job to job; benefit from the creation of effective
regional economic development strategies; and create high performance
workplaces.
PROGRAM OUTCOMES: Use of the WOTC has substantially
increased in recent years and use of the Welfare-to-Work Tax Credit (WtWTC) has
decreased in line with welfare reform objectives. For example, during Fiscal
Year 2005, over 630,000 certifications were issued by the state workforce
agencies, and this figure is growing every year.
UPDATE: On December 20, 2006, the President signed into law
the Tax-Relief and Health Care Act of 2006 (P. L. 109-432). This
legislation merges the Welfare-to-Work Tax Credit (WtWTC) into the WOTC and
extends the WOTC program, with a number of significant changes and provisions,
for a two-year period through December 31, 2007. The following statutory
changes apply to new hires who begin work for an employer after December 31,
2006:
- the earnings test for ex-felons is eliminated;
- the maximum age for food stamp recipients is increased;
- the certification request filing deadline is increased;
- the welfare-to-work provisions are merged into the WOTC.
This reauthorization is retroactive to January 1, 2006 and the amendments
apply to new hires that begin work for an employer on or after January 1, 2007.
NEW: The consolidated WOTC for hiring most target group
members can be as much as:
- $2,400 for each new adult hire;
- $1,200 for each new summer youth hire; and
- $9,000 for each new long-term family assistance recipient hired
over a two-year period.
WHAT NEW HIRES CAN QUALIFY EMPLOYERS
FOR THE WOTC?
The consolidated WOTC applies only to new employees hired on or after
January 1, 2007 and before January 1, 2008.
The new employee must belong to one of the following nine target groups:
- A member of a family that is receiving or recently received TANF
benefits for any 9-month period during the 18-month period ending on the
hiring date;
- An 18-39 year old member of a family that is receiving or recently
received Food Stamps;
- An 18-24 year old resident of one of the federally designated
Empowerment Zones
(EZs), Enterprise Communities (ECs), or Renewal Communities (RCs);
Note: All Round I Enterprise Communities (ECs) including
enhanced Enterprise Communities expired on December 31, 2004. Round II ECs
are still in existence as are all the EZs;
- A 16-17 year old
EZ/EC or RC
resident hired between May 1 and September 15 as a Summer Youth Employee
Note: All Round I Enterprise Communities (ECs) including
enhanced Enterprise Communities expired on December 31, 2004. Round II ECs
are still in existence as are all the EZs;
- A veteran who is a member of a family that is receiving or recently
received Food Stamps;
- A Vocational Rehabilitation Referral who completed or is completing
rehabilitative services from a State certified agency, an Employment
Network, or the U.S. Department of Veterans
Affairs;
- An ex-felon who has been convicted of a felony and has a hiring date
which is not more than one year after the last date on which he was so
convicted or released from prison; and/or
MINIMUM EMPLOYMENT OR RETENTION PERIOD
All new adult employees must work a minimum of 120 or 400 hours and
individuals hired as Summer Youth employees must work at least 90 days,
between May 1 and September 15, before an employer is eligible to claim the
tax credit.
HOW CAN EMPLOYERS PARTICIPATE IN THE WOTC?
To receive certification that a new employee qualifies the employer for this
tax credit, the employer must:
- Complete the one-page IRS Form 8850 by the day the job offer is made.
- Complete either the one page ETA Form 9061 or Form 9062 as appropriate.
For example:
- If the new employee has already been conditionally certified as
belonging to a WOTC target group by a state workforce agency (SWA) or
participating agency, complete the bottom part of ETA Form 9062, sign and
date it.
- If the new employee has not been conditionally certified, the employer
and/or the new employee must fill out and complete, sign and date ETA Form
9061
- Mail the completed and signed IRS and ETA forms to the employer's state
workforce agency (To find the address of the SWA in your state consult the
Directory of State Coordinators below).
NEW: IRS Form 8850 must be mailed within 28 days of the
employee's employment-start date for all individuals who begin work for an
employer on or after January 1, 2007.
Click here for IRS Form 8850, the Work Opportunity Tax Credit
Pre-Screening Notice and Certification Request and its
Instructions or download from
http://www.irs.gov, or call 1-800-829-1040.
Click
here for ETA Form 9061, the WOTC Individual Characteristics Form.
Click here for directories of the
State and
Regional Coordinators.
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