Work Opportunity Tax Credit
The legislative authority for the WOTC program, which had expired on December 31, 2014, has been extended retroactively. President Obama signed the tax extenders bill (the Act) on December 18, 2015. The current Act extends the WOTC program through December 31, 2019, and retroactively reauthorizes the program for new employees hired on or after January 1, 2015.
Every target group was extended through 2019 except for the HUD EZ target group. The HUD EZ was extended through 2016.
The Act also includes a new target group- Qualified Long Term Unemployed Recipient.
The term 'qualified long-term unemployment recipient' means any individual who is certified by the designated local agency as being in a period of unemployment which is not less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law.
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.
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
SNAP (Food Stamp) Recipients
Designated Community Residents
Vocational Rehabilitation Referral
Supplemental Security Income Recipients
Long-Term Unemployed Recipient
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?
Complete page 1 of IRS Form 8850 by the day the job offer is made.
Complete page 2 of IRS Form 8850 after the individual is hired.
Complete ETA Form 9061.
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.
Employers may submit applications electronically via our website, www.cwds.pa.gov
TAX CREDIT SERVICES
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 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:
Auxiliary aids and services are available upon request to individuals with disabilities.
Equal Opportunity Employer/Program