The Work Opportunity Tax Credit is a federal incentive that encourages businesses to hire individuals receiving government assistance.
Distributed at the state level, the credit can provide significant savings and boost cash flow for businesses by offsetting federal tax liability.
Gain a clear understanding of the Work Opportunity Tax Credit including eligibility criteria, application processes, and other key details that can help your organization leverage this opportunity.
Which target groups are included in criteria?
Receiving the Work Opportunity Tax Credit requires employing workers from specific target groups, including:
- Members of families that receive Supplemental Nutrition Assistance Program (SNAP) benefits, long-term Temporary Assistance to Needy Families (TANF), or Aid to Families with Dependent Children (AFDC)
- Qualified veterans who are unemployed, disabled or receiving SNAP benefits
- Qualified ex-felons or pardoned, paroled, or people on work-release
- Individuals who’ve completed or are completing vocational rehabilitation programs
- Qualified summer youth — employed only during the period between May 1 through Sept. 15 — ages 16 or 17 years-old living in an empowerment zone
- Individuals receiving Supplemental Security Income
- Residents of designated communities, including individuals living within a rural renewal county or empowerment zone
- Individuals who were unemployed for at least 27 consecutive weeks and received unemployment compensation under state or federal law during this period
How much can employers receive?
The amount of the tax credit varies depending on the target group and the number of hours worked by the employee. The maximum credit ranges from $1,200 to $9,600 per employee.
How do employers apply?
Employers can work with a third-party provider that can automate processes for determining qualification, obtaining an applicant or new hire signature, and filing the applications with the correct state agencies on behalf of the employer.
Alternatively, employers can facilitate the qualification and application process in house by having applicants and new hires complete IRS Form 8850,
Earn tax credits and incentives for your hiring and wage-based practices
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.