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Hiring? Tax Credits are Available for Hiring Workers from Certain Disadvantaged Target Groups

There is a glimmer of hope on the economic horizon. In fact, the economy has shown enough positive indicators that wholesale distributors may be ready to hang out the HELP WANTED sign again. This would be an ideal opportunity to take advantage of the Work Opportunity Tax Credit (WOTC), which puts people back to work and reduces operating costs.

WOTC is a federal tax credit that provides tax savings to employers who hire new workers from certain target groups such as veterans, youth, ex-felons and food stamp recipients.

The amount of the credit depends on the WOTC target group the new employee is in, the employee’s qualified first-year wages, and the number of hours a new hire works during the first year of employment. Workers must be hired before Aug. 31, 2011, to qualify.

The maximum credit for a qualified new adult hire is generally $2,400, but it can be as high as $4,800 for a qualified veteran with a service-related disability, and up to $9,000 for a qualified long-term Temporary Assistance to Needy Families (TANF) recipient hired over a two-year period.

Who Qualifies?
Each WOTC target group has specific criteria that it must meet for the employer to claim the tax credit. Employers should study these requirements carefully before making a claim. As broad categories, the target groups include:

1. Long-term TANF recipient* – A member of a family that received Temporary Assistance for Needy Families (TANF) for at least 18 consecutive months ending on the hiring date, or a member of a family that received TANF for any 18 months beginning after Aug. 5, 1997, and the earliest 18-month period, beginning after
   Aug. 5, 1997, ended during the past two years ending on the hiring date, or whose family stopped being eligible for TANF because federal or state law limited the maximum time those payments could be made, and the individual is hired not more than two years after such eligibility ended.
   
2. Other TANF recipient* – A member of a family that received TANF payments for any nine months during the 18-month period ending on the hiring date.
   
3. Veterans* – A member of a family that received food stamps for at least a three-month period during the
   15-month period ending on the hiring date, or a disabled veteran entitled to compensation for a service-connected disability hired within one year of discharge or release from active duty or unemployed for a period or periods totaling at least six months of the year ending on the hiring date.
4. 18-39-year-old food stamp recipient* – A member of a family that received food stamps for either the six-month period ending on the hiring date, or for at least three of the five months ending on the hiring date in the case of a family member who ceased to be eligible for such assistance under Section 6(o) of the Food Stamp Act of 1977.
5. 18-39-year-old designated community resident* – An individual who lives within an Empowerment Zone (EZ), Renewal Community (RC), or Rural Renewal County (RRC).**
6. 16-17-year-old summer youth – An individual who works for the employer between May 1 and September 15, and lives in an Empowerment Zone or Renewal Community.
7. Vocational rehabilitation referral – A disabled person referred to the employer upon completion of (or while receiving) rehabilitation services approved by the state, the Ticket-to-Work Program or the Department of Veterans Affairs.
8. Ex-felon – An individual who was convicted of a felony and who is hired within one year after the conviction or release from prison.
9. SSI recipient – An individual who received Supplemental Security Income benefits for any month ending during the past 60-day period ending on the hiring date.

Some employees do not qualify the employer for the WOTC. They include:

• Relatives and dependents
• Majority owners of the employer
• Former employees

Applying for the Credit
Although WOTC provides federal tax credits, it is administered through state employment agencies. To receive certification that a new employee qualifies for this tax credit, the employer must:

• Complete page one of IRS Form 8850 by the day the job offer is made, and page two after the person has been hired.
• Complete Department of Labor Employment and Training Administration Form 9061 or Form 9062, depending on whether or not the new employee has already been conditionally qualified by a state workforce agency.
• Mail these forms to the employer’s state workforce agency within 28 days of the employee’s start date.

To Learn More, Download:

• IRS Form 8850 at www.irs.gov.
• ETA Form 9061 and Form 9062 at www.doleta.gov
• A list of state and regional WOTC coordinators at www.doleta.gov

* The individual need not receive the assistance for the entire period if the family received it for the entire period and the individual was on the grant, and thus received assistance for at least one day of the specified period.

** For the location of EZs/RCs, visit www.hud.gov/crlocator and select “Enter Address.” For RRCs, see Instructions to IRS Form 8850, June/07.