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General Instructions

Purpose of Form

Use Form 5884 to claim the work opportunity credit for qualified first- and/or second-year wages you paid to or incurred for targeted group employees during the tax year. Your business doesn't have to be located in an empowerment zone or rural renewal county to qualify for this credit.

You can claim or elect not to claim the work opportunity credit any time within 3 years from the due date of your return on either your original return or an amended return.

Partnerships, S corporations, cooperatives, estates, and trusts must file this form to claim the credit. All other taxpayers aren't required to complete or file this form if their only source for this credit is a partnership, S corporation, cooperative, estate, or trust. Instead, they can report this credit directly on Form 3800, General Business Credit.

How To Claim the Credit

You must ask for and be issued a certification for each employee from the state workforce agency (SWA) (formerly known as the state employment security agency (SESA)) of the state in which your business is located. The certification proves that the employee is a member of a targeted group. You must either:

  • Receive the certification by the day the individual begins work; or

  • Complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day you offer the individual a job and receive the certification before you claim the credit.

If you complete Form 8850, it must be signed by you and the individual and submitted to the SWA of the state in which your business is located (where the employee works) by the 28th calendar day after the individual begins work.

If the SWA denies the request, it will provide a written explanation of the reason for denial. If a certification is revoked because it was based on false information provided by the worker, wages paid or incurred after the date you receive the notice of revocation don't qualify for the credit.

Targeted group employee.   An employee is a member of a targeted group if he or she began working for you before 2020 and is a:
  • Long-term family assistance recipient,

  • Qualified recipient of Temporary Assistance for Needy Families (TANF),

  • Qualified veteran,

  • Qualified ex-felon,

  • Designated community resident,

  • Vocational rehabilitation referral,

  • Summer youth employee,

  • Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) recipient,

  • SSI recipient, or

  • Qualified long-term unemployment recipient.

  See the Instructions for Form 8850 and section 51(d) for details and restrictions.

Qualified Wages

Wages qualifying for the credit have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA) (determined without regard to the $7,000 FUTA tax wage base). If the work performed by any employee during more than half of any pay period qualifies under FUTA as agricultural labor, that employee’s wages subject to social security and Medicare taxes are qualified wages. For a special rule that applies to railroad employees, see section 51(h)(1)(B). Qualified wages for any employee must be reduced by the amount of any work supplementation payments you received under the Social Security Act for the employee.

The amount of qualified wages for any employee is zero if:

  • The employee didn't work for you for at least 120 hours,

  • The employee worked for you previously,

  • The employee is your dependent,

  • The employee is related to you (see section 51(i)(1)), or

  • 50% or less of the wages the employee received from you were for working in your trade or business.

Qualified wages do not include:

  • Wages paid to or incurred for any employee during any period for which you received payment for the employee from a federally funded on-the-job training program;

  • Wages paid to or incurred for a summer youth employee for services performed while the employee lived outside an empowerment zone;

  • Wages paid to or incurred for a designated community resident for services performed while the employee lived outside an empowerment zone or rural renewal county;

  • Wages paid to or incurred for services performed by a summer youth employee before or after any 90-day period between May 1 and September 15; and

  • Wages for services of replacement workers during a strike or lockout.

Member of Controlled Group or Business Under Common Control

For purposes of figuring the credit, all members of a controlled group of corporations (as defined in section 52(a)) and all members of a group of businesses under common control (as defined in section 52(b)), are treated as a single taxpayer. As a member, figure your credit based on your proportionate share of qualified wages giving rise to the group’s work opportunity credit. Enter your share of the credit on line 2. Attach a statement showing how your share of the credit was figured, and enter “See attached” next to the entry space for line 2.

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