You Could be Eligible for the Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) Is available to help employers who hire workers from targeted groups. The credit is worth as much as $2,400 for each eligible employee, sometimes more for certain groups. The WOTC targeted groups are those who typically face significant barriers to employment, the specific groups are discussed below.

To be eligible for the credit the employee generally must begin working for the employer before January 1, 2026.

The IRS recently issued some updated information on the pre-screening and certification processes. To satisfy a requirement to pre-screen a job applicant, a pre-screening notice must be completed by the job applicant and the employer on or before the day a job offer is made. This is done by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.

Which new hires qualify?
An employer is eligible for the credit only for qualified wages paid to members of a targeted group. These groups are:

  1. Qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program,
  2. Qualified veterans,
  3. Qualified ex-felons,
  4. Designated community residents,
  5. Vocational rehabilitation referrals,
  6. Qualified summer youth employees,
  7. Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP),
  8. Qualified Supplemental Security Income recipients,
  9. Long-term family assistance recipients, and
  10. Long-term unemployed individuals.

Other rules and requirements
There are a number of requirements to qualify for the credit. For example, there’s a minimum requirement that each employee must have completed at least 120 hours of service for the employer. Also, the credit isn’t available for certain employees who are related to or who previously worked for the employer.

There are different rules and credit amounts for certain employees. The maximum credit available for the first-year wages is $2,400 for each employee, $4,000 for long-term family assistance recipients, and $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit of $9,000 over two years.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

A beneficial credit
For most employers hiring from targeted groups, the WOTC can be beneficial. There are limited circumstances where the rules may prohibit the credit or require an allocation of it. Please contact your Rudler, PSC advisor at 859-331-1717 for more information on the credits and any questions you may have.

RUDLER, PSC CPAs and Business Advisors

This week's Rudler Review is presented by Becca Thorman, CPA and John Wood, CPA, CVA.

If you would like to discuss your particular situation, contact Becca or John at 859-331-1717.

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