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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. In most cases, the credit can be as much as 40% of the "qualified first year wages" up to $9,600.

The American Taxpayer Relief Act of 2012 extended the WOTC for qualified veterans hired after December 31, 2012, and before January 1, 2014, and retroactively extended the WOTC for other targeted group members (described below) who begin work after December 31, 2011, and before January 1, 2014.

You must obtain certification from your state employment security agency that an individual is a targeted group member before you may 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.  The form must be submitted 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.

Additional Information:


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
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