On June 17, 2016, the IRS issued Notice 2016-40 providing 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 Department of Labor (DOL) Form 9061, Individual Characteristics Form (ICF) – Work Opportunity Tax Credit, to the applicable State Work Force Agency. The date for employers to submit forms for qualified new hires from January 1, 2015, to August 31, 2016, has been extended until September 28, 2016.
The Work Opportunity Tax Credit (WOTC) program offers employers federal income tax credits to hire individuals in these targeted groups:
- Members of families receiving Temporary Assistance for Needy Families benefits
- Qualified veterans
- Qualified ex-felons
- Designated community residents
- Vocational rehabilitation referrals
- Qualified summer youth employees
- Qualified Supplemental Nutrition Assistance Program recipients
- Qualified Social Security recipients
- Long-term family assistance recipients
The amount of credit can range from $1,200 to $9,600, depending on the employee’s target group, wages and number of hours worked during the first year of employment.
The Protecting Americans from Tax Hikes (PATH) Act of 2015 extended WOTC retroactively from January 1, 2015, to December 31, 2019. As a result, the IRS determined employers that hire members of targeted groups needed more time to comply with the 28-day deadline requirements of Internal Revenue Code (IRC) §51(d)(13)(A)(ii). IRS Notice 2016-40 extends the transition relief previously provided for in IRS Notice 2016-22 by three months. As a result, an employer hiring any qualified new hire from January 1, 2015, through August 31, 2016, must submit Form 8850 and Form 9061 by September 28, 2016.
In addition to the previously stated targeted groups, the PATH Act amended IRC § 51(d)(1) to add qualified long-term unemployment recipients to the list beginning January 1, 2016. A qualified long-term unemployment recipient is defined as any individual who was unemployed for at least 27 consecutive weeks and includes a period of time (which may be less than 27 weeks) that the individual was receiving unemployment compensation under state or federal law. The IRS and DOL recently revised Forms 8850 and 9061 to allow employers to request certification for qualified long-term unemployment recipients.
Therefore, employers who have hired qualifying individuals on or after January 1, 2015, and on or before August 31, 2016, will be considered to have timely filed the required forms if they’re submitted no later than September 28, 2016. In addition, employers who hire an individual on or after January 1, 2016, and on or before August 31, 2016, who meets the definition of a qualified long-term unemployment recipient will have until September 28, 2016, to submit the required forms. Beginning September 1, 2016, in order to meet the filing deadline requirements of Section 51(d)(13)(A)(ii), employers are required to submit the necessary forms for all targeted groups within 28 days of an individual beginning work. Any forms submitted after 28 days of an individual’s start date will be disallowed and won’t be eligible for WOTC.