Tax Credits are Available for Hiring Workers from Certain
Disadvantaged Target Groups
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.
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.
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.
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.
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:
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
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.
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
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
designated community resident* – An individual who
lives within an Empowerment Zone (EZ), Renewal Community
(RC), or Rural Renewal County (RRC).**
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.
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
Ex-felon – An individual who was convicted of a
felony and who is hired within one year after the conviction
or release from prison.
recipient – An individual who received Supplemental
Security Income benefits for any month ending during the
past 60-day period ending on the hiring date.
employees do not qualify the employer for the WOTC. They
Majority owners of the employer
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
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.
Learn More, Download:
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.
information contained herein is general in nature and is not intended, and
should not be construed, as legal, accounting, or tax advice or opinion provided
by Clifton Gunderson LLP to the reader. The reader also is cautioned that
this material may not be applicable to, or suitable for, the readers
specific circumstances or needs, and may require consideration of non-tax
and other tax factors if any action is to be contemplated. The reader should
contact his or her Clifton Gunderson LLP or other tax professional prior to
taking any action based upon this information. Clifton Gunderson LLP assumes
no obligation to inform the reader of any changes in tax laws or other factors
that could affect the information contained herein.
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