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Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit incentive that the Congress provides to private-sector businesses for hiring individuals from twelve target groups who have consistently faced significant barriers to employment. The main objective of this program is to enable the targeted employees to gradually move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while the participating employers are compensated by being able to reduce their federal income tax liability. If you are a “for-profit” employer in Massachusetts, you may be eligible for this federal tax credit. To quality for this program, you must hire an employee from one of the twelve target groups before a job offer is made.
1. Long-term TANF recipient
Member of a family that received Temporary Assistance for Needy Families (TANF) for at least 18 consecutive months ending on the hiring date; or receives TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, and the earliest 18-month period beginning after August 5, 1997, ended during the past 2 years prior to the hiring date; or whose family stopped being eligible for TANF payments because Federal or state law limited the maximum time those payments could be made, and the individual is hired not more than 2 years after such eligibility ended.
2. Other TANF recipient
Member of a family that received TANF payments for any 9 months during the 18-month period ending on the hiring date.
3. Veteran
Member of a family that received assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date; or a disabled veteran entitled to compensation for a service-connected disability and is hired not more than one year after being discharged or released from active duty; or a disabled veteran entitled to compensation for a service-connected disability and was unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the one-year period ending on the hiring date.
4. 18-39 year-old SNAP (food stamps) benefits’ recipient
Member of a family who is at least age 18 but not yet 40 on the hiring date, and who received SNAP (food stamps) benefits for either the 6-month period ending on the hiring date, or he/she is no longer eligible for such assistance under Section 6(o) of the Food Stamp Act of 1977, but the family received SNAP benefits for at least 3 of the 5-month period ending on the hiring date.
5. 18-39 year-old designated community resident
And individual who is at least age 18 but not yet 40 on the hiring date and lives within an Empowerment Zone (EZ), Renewal Community (RC), or Rural Renewal County (RRC). ∗∗
6. 16-17 year-old summer youth
Individual who works for the employer between May 1 and September 15, is at least age 16 but not yet 18 on the hiring date (or if later, on May 1), has never worked for the employer before, and lives in an Empowerment Zone or Renewal Community.
7. Vocational rehabilitation referral
Disabled person referred to the employer upon completion of (or while receiving) rehabilitation services approved by the State, an Employment Network under the Ticket-to-Work Program, or the Department of Veterans Affairs.
8. Ex-felon
Individual who was convicted of a felony and who is hired not more than one year after the conviction or release from prison.
09. SSI recipient
Individual who is receiving Supplemental Security Income benefits for any month ending during the past 60-day period ending on the hiring date.
10. Hurricane Katrina employee
An individual who, on August 28, 2005, had a primary residence in the Gulf Opportunity (GO) Zone (core disaster zone) and, during a 4-year period beginning on this date, is hired to perform services, principally, in the GO Zone. State certification does not apply to this group.
11. Unemployed veteran
A veteran hired after 2008 and before 2011, who is certified as: 1) having been discharged or released from active duty at any time during the 5-year period ending on the hiring date, and 2) having received unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.
12. Disconnected youth
Individual who is certified as: 1) having attained age 16 but not age 25 on the hiring date, 2) not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date, 3) not regularly employed during such 6-month period, and 4) not readily employable by reason of lacking a sufficient number of basic skills.
Transition Relief: Any employer who hires an unemployed veteran or disconnected youth after
December 31, 2008, and before September 17, 2009, will be considered to satisfy the deadline in Section 51(d)(13)(A)(ii)(II) if the employer submits IRS Form 8850 to a State Workforce Agency to request certification not later than October 17, 2009.
Some employees do not qualify the employer for the WOTC.
They include:
Relatives and dependents,
Majority owners of the employer, or
Former employees
Minimum employment or retention period. All new adult employees must work a minimum of 120 or 400 hours. Individuals hired as Summer Youth employees must work at least 90 days, between May 1 and September 15, before an employer is eligible to claim the tax credit. The WOTC amount an employer may claim depends on the hours the employee works. The credit is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours and 40% for those employed 400 hours or more.
