The Protecting Americans from Tax Hikes (PATH) Act of 2015 retroactively extended the Work Opportunity Tax Credit (WOTC) from January 1, 2015, to December 31, 2019. Due to the late reinstatement of the credit, most employers likely failed to meet the 28-day deadline for submitting the required certification to the employer’s respective state workforce agency, which is a prerequisite to claiming the WOTC.
On March 7, 2016, the IRS issued Notice 2016-22 to provide employers more time to comply with the 28-day deadline for submitting IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and U.S. Department of Labor Form 9061, Individual Characteristics Form, to the state workforce agency.
Pursuant to this notice, employers must submit the required forms by June 29, 2016, for qualified new hires with a start date of January 1, 2015, through May 31, 2016. Calendar-year employers opting to take advantage of this relief might consider extending their 2015 return to avoid the need to amend in order to claim the credit.
The WOTC program offers employers federal income tax credits to hire individuals of certain targeted groups, including:
- Members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program
- Qualified veterans
- Qualified ex-felons
- Designated community residents
- Vocational rehabilitation referrals
- Qualified summer youth employees
- Qualified supplemental nutrition assistance program (SNAP) recipients
- Qualified supplemental security income (SSI) recipients
- Long-term family assistance recipients
The credit for hiring an individual of a targeted group can range from $2,400 to $9,600 depending on the targeted group and the amount of wages paid.
In addition to these targeted groups, the PATH Act added qualified long-term unemployment recipients to the list of targeted groups beginning January 1, 2016. The act defines a “qualified long-term unemployment recipient” as any individual unemployed for 27 consecutive weeks or more and includes a period of time the individual received unemployment compensation under state or federal law. The IRS and Department of Labor are revising Forms 8850 and 9061 to request certification for qualified long-term unemployment recipients.
Employers who hired qualified long-term unemployed recipients on or after January 1, 2016, and on or before May 31, 2016, also have until June 29, 2016, to submit the required IRS forms to the state workforce agency. Beginning June 1, 2016, employers must submit the required forms for all targeted groups within 28 days of an individual beginning work; forms submitted more than 28 days after the employee’s start date will be disallowed and ineligible for the WOTC.
If you have additional questions about the WOTC, contact your BKD advisor.