Tax

Work Opportunity Tax Credit Retroactively Extended for 2014

February 2015
Author:  Bob Johnson Jr

Bob Johnson Jr

Partner

SALT Services

Manufacturing & Distribution

1201 Walnut Street, Suite 1700
Kansas City, MO 64106-2246

Kansas City
816.221.6300

On December 19, 2014, President Obama signed the Tax Increase Prevention Act of 2014 (TIPA). The bill extends the Work Opportunity Tax Credit (WOTC) program, which expired on December 31, 2013, through December 31, 2014, and retroactively reauthorizes new qualifying employees hired on or after January 1, 2014, as WOTC-eligible. With the extension, employers also receive additional time to comply with the requirements to receive WOTC for employees hired in 2014.

The WOTC is a federal tax credit available to employers who hire and retain qualified veterans and individuals from IRS-designated target groups that historically have faced challenges gaining employment. Before claiming the WOTC, employers must obtain certification a new employee is a qualified veteran or member of a targeted group. To determine if an employee may be eligible, employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. Form 8850 must be completed by the first day an employee works and be filed with the employer’s respective state workforce agency within 28 days of the employee’s first day of work. The maximum credit per qualified employee ranges from $2,400 to $9,600, depending on the employee’s targeted group, hours worked and wages paid.

Qualified tax-exempt organizations, as defined in IRC Section 501(c), may claim the credit for qualified veterans who began work on or after November 22, 2011, and before January 1, 2015. Tax-exempt employers may not claim the WOTC for members of other targeted groups. Tax-exempt employers claim the credit against the employer Social Security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

Because WOTC program approval was delayed for 2014, employers may not have submitted Form 8850 within the required 28-day window from the employee’s start date. TIPA stipulates an employer that hired eligible employees, or a qualified tax-exempt organization that hired qualified veterans, may fulfill the 28-day filing requirement by submitting the completed Form 8850 to the appropriate state agency no later than April 30, 2015. The requirement to complete Form 8850 by the first day of employment is waived if the form is received by April 30.

If you have questions about how the WOTC extension could affect your organization, contact your BKD advisor.

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