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Understanding your CP324A notice

What this notice is about 

You claimed the Work Opportunity Tax Credit (WOTC) on Form 8863 of your 2025 Form 1040 tax return. Our initial review of your 2025 Form 1040 tax return indicates you do not have a business with employees. The credit is only available to employers with qualified employees.

If you are not an employer with qualified employees, you may need to amend your return. This notice has been sent to inform you of this discrepancy and to help you verify if you claimed this credit correctly.

You may want to 

Please review your 2025 Form 1040 federal tax return and make sure you correctly claimed the WOTC. If you claimed this credit in error:

  1. File an amended return. If you filed electronically, you may file your amended return electronically. You can get help at an IRS Taxpayer Assistance Center.
  2. Share this letter with anyone helping you with preparing your returns.
  3. If you file an amended federal tax return, you may also need to file an amended state or local tax return.

Failure to review and address any incorrect information could result in additional communication from the IRS.

Frequently asked questions 

A credit for qualified business expenses paid for an eligible employee for generally, the first year of employment. 

Targeted employees include the following:

  • qualified IV-A recipient
  • qualified veteran
  • qualified ex-felon
  • designated community resident (DCR)
  • vocational rehabilitation referral
  • qualified summer youth employee
  • qualified Supplemental Nutrition Assistance Program (SNAP) benefits recipient
  • qualified Supplemental Security Income (SSI) recipient
  • long-term family assistance recipient
  • qualified long-term unemployment recipient

Employers of all sizes are eligible to claim the WOTC. This includes both taxable and certain tax-exempt employers located in the United States and in certain U.S. territories. While taxable employers claim the WOTC against income taxes, eligible tax-exempt employers can claim the WOTC only against payroll taxes and only for wages paid to members of the Qualified Veteran targeted group.

An employer must pre-screen and obtain certification from the appropriate Designated Local Agency (referred to as a State Workforce Agency or SWA) that an employee is a member of a targeted group to claim the credit. To satisfy the requirement to pre-screen a job applicant, on or before the day that a job offer is made, a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) must be completed by the job applicant and the employer.

After the required certification is received, taxable employers claim the credit as a general business credit on Form 3800 against their income tax by filing the following:

The credit is limited to the amount of the business income tax liability or Social Security tax owed.

A taxable business may apply the credit against its business income tax liability. In general, taxable employers may carry the current year's unused WOTC back one year and then forward up to 20 years. See the instructions for Form 3800, General Business Credit, for more details.

For qualified tax-exempt organizations, the credit is limited to the amount of employer Social Security tax owed on the total taxable social security wages and tips reported by the organization for the employment tax period for which the credit is claimed. See "Tax-exempt employers," below.

For more information on the wages that can be used to determine the credit, see the instructions for Form 5884, Work Opportunity Credit PDF, and Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

Generally, this credit can only be claimed for the first year of employment. 

Helpful information

Follow the links below to read more about topics related to the WOTC and qualified business expenses.

Follow the links below to read more about filing an amended return or making a payment.