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Other Credits

Question: I heard there is a credit for hiring certain groups of workers, such as veterans or ex-felons. Is that the same thing as the work opportunity tax credit?

Answer:

The work opportunity tax credit (WOTC) provides an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs.

The Tax Increase Prevention Act of 2014 extended the WOTC for members of targeted groups hired after December 31, 2013, and before January 1, 2015. The benefit is a 40 percent credit generally on the first 6,000 of wages paid to new hires in the first year of employment.

You must obtain certification from your state employment security agency that an individual is a targeted group member before you claim the credit. Generally, you obtain certification by submitting Form 8850 (.pdf), Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to the state employment security agency. You must submit the form not later than the 28th day after the individual begins work for you.

Newly hired individuals from the following targeted groups might qualify you for this tax credit:

  • a qualified Title IV-A recipient,
  • a qualified veteran,
  • a qualified ex-felon,
  • a designated community resident,
  • a vocational rehabilitation referral,
  • a qualified summer youth employee,
  • a qualified supplemental nutrition assistance program benefits recipient,
  • a qualified SSI recipient, or
  • a long-term family assistance recipient.

You can calculate the credit by completing Form 5884 (.pdf), Work Opportunity Credit, with the business' tax return. Taxpayers claim the credit on Form 3800 (.pdf), as part of the General Business Credit.

For information on the WOTC available to qualified tax-exempt organizations that hire qualified veterans, see Work Opportunity Tax Credit Extended.


Category: Child Care Credit, Other Credits
Subcategory: Other Credits

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224