Workforce Development  > Employment Tax Credits > Work Opportunity Tax Credit

Work Opportunity Tax Credit

ALERT

The WOTC program's legislative authority for all WOTC target groups expired on December 31, 2013. As a result, the program currently is undergoing an authorization lapse.
 
At this time, there is no indication whether Congress will pass legislation extending authority for the expired program and target groups beyond December 31, 2013. However, in the past when the tax credit program's authority lapsed and Congress subsequently reauthorized the program, certain legislative provisions allowed for retroactive certification of eligibility for the period between the expiration date and the reauthorization date. In anticipation of a retroactive reauthorization, the PA Department of Labor & Industry, Bureau of Workforce Partnership and Operations, will continue to accept applications (certification requests) of all expired target groups.
 
Even though Congress has, in the past, provided for retroactive certifications there is no guarantee that this will happen again, or that employers' new hires during this hiatus will be certified for the tax credit. Additional information may be found here.

What is WOTC?

WOTC is a Federal tax credit available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are a few simple steps to follow to apply for WOTC.
 
Note: To get the latest updates on WOTC sign up for US Dept of Labor email notifications - http://www.dol.gov/opa/media/press/opa/

How does WOTC work?

The tax credit employers can claim depends on the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned.
  • If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual's first year wages, up to the maximum tax credit.
  • If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual's first year wages, up to the maximum tax credit.
Only for the Long-term Temporary Assistance for Needy Families (TANF) target group, the credit is available to employers who hire members of this group for a two-year period.
  • If the individual works at least 120 hours in the first year, the employer may claim a tax credit equal to 40% of first year wages, up to the maximum tax credit.
  • If the individual works at least 400 hours in the second year, the employer may claim a tax credit equal to 50% of second year wages, up to the maximum tax credit.

Who can I hire?

Employers may submit certification requests to the state workforce agency for all WOTC target groups listed below.
  • Veterans – 5 categories
  • TANF Recipients
  • SNAP (Food Stamp) Recipients
  • Designated Community Residents
  • Vocational Rehabilitation Referral
  • Ex-Felons
  • Supplemental Security Income Recipients
  • Summer Youth
 
View the latest WOTC pamphlet

How are the tax credits calculated?

Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. Use the WOTC Calculator to see how much your business can earn in tax credits.

How do I apply?

  1. Complete page 1 of IRS Form 8850 by the day the job offer is made.
  2. Complete page 2 of IRS Form 8850 after the individual is hired.
  3. Complete ETA Form 9061.
  4. Submit the completed and signed IRS and ETA forms to the following address for Pennsylvania:
PA Dept of Labor & Industry
Tax Credit Services
651 Boas Street, 12th Floor
Harrisburg, Pa. 17121-0750

NOTE: Forms must be submitted within 28 calendar days of the new employee's start date. Proof of mailing may be required. Refer to ETA Handbook No. 408 and its Addendum for reference.

NOTE: Employers may submit applications electronically via our website, www.cwds.pa.gov.
 
TAX CREDIT SERVICES
 
800-345-2555

Federal Bonding Program

What is the Federal Bonding Program?

The Federal Bonding Program was created as an incentive to employers to hire "at-risk," hard-to-place job seekers and may provide an employer a business insurance policy that protects an employer against loss of money or property due to employee dishonesty. The bond is good for six months for the amount of $5,000 at no cost.

How To Obtain a Federal Bond

To request a Federal Bond, the employer must call the Bonding Coordinator on the new employee's start date. A simple 10-15 minute telephone interview takes place. A confirmation letter is then sent to the company and McLaughlin Company, who issues the bond directly to the employer.
 
For more information on the Federal Bonding Program contact:
 
800-345-2555
 
Auxiliary aids and services are available upon request to individuals with disabilities.
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