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October 2009

Employers Can Earn Tax Credits for Hiring From Two New
Targeted Groups

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Doug Stucker
The Work Opportunity Tax Credit (WOTC) is a program offering employers a federal income tax credit for hiring certain individuals. The credit amount can be as much as $2,400 for each new hire ($4,800 for certain veterans and $9,000 for certain aid recipients). Qualifying individuals generally come from one of two groups.

One group consists of individuals 18-39 years old residing in designated geographic areas. These areas include empowerment zones, renewal communities, enterprise communities and rural renewal counties. Approximately 410 rural renewal counties were added in 2007 and include parishes in Louisiana and areas in 31 other states. Counties qualify under a formula developed by the government; one criterion is having lost population within a specific time. Empowerment zones, renewal communities and enterprise communities are areas that may consist of specific Census tracts designated by the U.S. Department of Housing and Urban Development.

The other group consists of new hires that are part of the following targeted designations:

  • Long-term TANF (Temporary Assistance to Needy Families) recipients
  • Other TANF recipients
  • Qualified food stamp recipients
  • Qualified veterans
  • Vocational rehabilitation referrals
  • Supplemental Social Security recipients
  • Qualified ex-felons
  • Summer youth employees
  • Unemployed veterans (newly added designation)
  • Disconnected youths (newly added designation)

Generally on or before the day the individual is hired, the employer and applicant complete a pre-screening notice. The notice is completed as part of a written request for certification to the designated state agency and should be submitted no later than 28 days after the individual begins work. The state agency will issue the employer a certification for qualified employees.

The credit may be used to offset alternative minimum tax, and unused credit may be carried forward 20 years.

For more information on how these changes may affect your business, contact your BKD advisor.