The Work Opportunity Tax Credit (WOTC)
What is the Work Opportunity Tax Credit? Employers might be eligible for tax credits for hiring new personnel. The Work Opportunity Tax Credit (WOTC) is a federal tax credit that reduces the federal tax liability of private-for-profit employers. Employers can hire from eleven different targeted groups:- Qualified Temporary Assistance to needy Families Recipients (TANF)
- Qualified Veterans/Disabled Veterans
- Unemployed Veterans
- Qualified Ex-felons
- Qualified Designated Community Residents (DCR) residing in an Empowerment Zone (EZ), Renewal Community (RC), or in a Rural Renewal County (RRC)
- Qualified Vocational Rehabilitation Agency Referrals
- Disconnected Youth
- Qualified Summer Youth (SY)
- Qualified Food Stamp Recipients (FS)
- Qualified Supplemental Security Income Recipients (SSI)
- Qualified Long-Term Family Assistance Recipients (LTFAR)
What are the Maximum Credits Available?
- $1,200 for each new Summer Youth* hired
- $2,400 for each new Adult hired
- $4,800 for each new Disabled Veteran hired
- $9,000 for each new Long Term Family Assistance Recipient hired over a two year period
*The credit is based on 40% of up to $6,000 in qualified wages during the first year of employment. Summer Youth qualify for 40% of the first $3,000 in wages during the required working period of May 1 through September 15.
How long must new employees be retained? All new employees must work a minimum of 120 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. Recent program changes took place in 2007 that impacted multiple target groups. One such change was the consolidation of the Welfare-To-Work Tax credit program into the WOTC program to become known as Long-Term Family Assistance and a second change was the creation of the new Disabled Veteran target group that went into effect May 25, 2007. On February 17th as part of the American Recovery and Reinvestment Act (ARRA) of 2009 two new categories were created Unemployed Veterans and Disconnected Youth.
The WOTC Program has been reauthorized until August 31, 2011
