Work Opportunity Tax Credit
ALERT
On Nov. 21, 2011, President Obama signed into law the Vow to Hire Heroes Act of 2011. Section 261 of the Act, the "Returning Heroes and Wounded Warriors Work Opportunity Tax Credits," amends and expands the definition of WOTC's Veteran target groups. The changes and new provisions in this Act apply to individuals who begin to work for an employer the day after its enactment, Nov. 22, 2011, and before Jan. 1, 2013.
The Vow to Hire Heroes Act of 2011 includes the following provisions:
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Extends the current target group for Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits with the same qualified wages cap* ($6,000) and maximum tax credit ($2,400).
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Extends the current target group for Veterans with a service-connected disability with the same qualified wages cap ($12,000) and maximum tax credit ($4,800).
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Extends the current target group for Veterans with a service-connected disability unemployed for at least 6 months with the qualified wages cap increased to $24,000 and the maximum tax credit increased to $9,600.
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Establishes a new target group for unemployed Veterans, similar to the Recovery Act of 2009 unemployed Veteran group that expired on Dec. 31, 2010:
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Veterans unemployed for at least 4 weeks with a qualified wages cap of $6,000 and maximum tax credit of $2,400.
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Veterans unemployed for at least 6 months with qualified wages cap of $14,000 and maximum tax credit of $5,600.
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State Workforce Agencies will certify veterans as meeting the required periods of unemployment based on receipt of unemployment insurance compensation.
Note: The 5-year period ending on the hiring day requirement that was part of the Recovery Act unemployed veteran group was rescinded.
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Qualified "tax-exempt" (i.e., 501(c)) organizations can now participate by hiring qualified veterans and are now eligible to claim the WOTC.
Tax-Exempt Employers
- Qualified tax-exempt organizations, organizations described in IRC Section 501(c) and exempt from taxation under IRC Section 501(a), may claim the credit for qualified veterans who begin work on or after Nov. 22, 2011, and before Jan. 1, 2013.
- After the required certification is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C , Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.
- File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. It is recommended that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit as the forms are processed separately.
- In addition to Form 5884-C and its instructions, tax-exempt employers should see IRS Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit.
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These provisions became effective the day after the President signed the Vow to Hire Heroes Act into law, Nov. 22, 2011, through Dec. 31, 2012.
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The Vow to Hire Heroes Act does not extend any of the other (non-Veteran) WOTC target groups, which expired on Dec. 31, 2011.
Note: All previous tax credit target groups expired on Dec. 31, 2011.
Your Business Qualifies When You Hire Eligible Individuals
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No limit to the number of new hires
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Any size employer can benefit
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Employers decide whom to hire
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Minimal paperwork to request tax credit
Minimum Employment or Retention Period
WOTC:
New adult hires must work a minimum of 120 hours.
Applying for Tax Credits
WOTC:
The applicant completes the front of the
IRS Form 8850 (Pre-Screening Notice and Certification Request); the employer completes the back. The completed IRS Form 8850 with original signatures must be postmarked within
28 calendar days after the new hire's start date;
and the applicant also completes the
ETA 9061 (Individual Characteristics Form). This form has no required postmark date but should be mailed with the IRS Form 8850.
Note: Employers can now file for the tax credits electronically, which will save you time and money, please call the Tax Credit Coordination Services Office for more information.
Note: The tax credit document(s) must indicate at least one potentially eligible target group in order for the request to be processed. Requests must be filed within the time guidelines indicated above.
Who and What Doesn't Qualify
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No tax credit may be claimed for federally subsidized On-The-Job Training (OJT); however, wages paid after OJT expires can qualify for the credit.
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Wages paid to relatives
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Rehires are not eligible for the federal tax credit
Where To Obtain Tax Credit Forms
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Click on: Workforce Development
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Click on: Employment Tax Credits
Or contact:
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Pennsylvania CareerLink® Offices
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Pennsylvania Vocational Rehabilitation Offices
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Welfare County Assistance Offices
Or contact:
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Tax Credit Coordination Services 800-345-2555
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.
Where To Obtain Federal Bonding Program
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.
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For questions or more information contact:
TAX CREDIT COORDINATION SERVICES
800-345-2555
FEDERAL BONDING COORDINATOR
717-787-6915
Employers can now file for the tax credits electronically, please call the Tax Credit Coordination Services Office for more information.
Mail Tax Credit Forms To:
TAX CREDIT COORDINATION SERVICES
651 Boas Street, 12th Floor
Harrisburg, Pa. 17121-0750
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Auxiliary aids and services are available upon request to individuals with disabilities.
Equal Opportunity Employer/Program
* For Veterans target groups, WOTC is based on qualified wages paid to the employee for the first year of employment. The tax credit is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours, and 40% for those employed 400 hours or more.
