FAQs - Work Opportunity Tax Credit (WOTC)
- What is the Work Opportunity Tax Credit (WOTC)?
- What are the target groups?
- Can family members qualify employers for the tax credit?
- Can a former employee be rehired and qualify the employer for the tax credit?
- Do disabled veterans now qualify an employer for the tax credit?
- What is the amount of the credit available through WOTC?
- For which tax years can the credit be applied?
- How long must the individual remain on the job to provide the employer with a tax credit?
- What is the process for applying for WOTC?
- Where can an employer obtain the Pre-Screening Notice, Form 8850 and Individual Characteristics Form, ETA 9061?
- Where do you call to get more information?
What is the Work Opportunity Tax Credit (WOTC)?
The WOTC promotes the hiring of individuals who qualify as members of target groups, by providing a federal tax credit incentive of up to $9,600 for employers who hire them.
The Tax Increase Prevention Act of 2014 (P.L. 113-295) reauthorizes the WOTC program and Empowerment Zones, without changes, through December 31, 2014.
The WOTC has two purposes:
- To promote the hiring of individuals who qualify as a member of a target group, and
- To provide a federal tax credit to employers who hire these individuals.
The Employment Development Department is the WOTC certifying agency for California employers.
What are the target groups?
The target groups consist of:
- Qualified recipients of Temporary Assistance to Needy Families (TANF).
- Qualified veterans receiving Food Stamps or qualified veterans with a service connected disability who:
- Have a hiring date which is not more than one year after having been discharged or released from active duty OR
- Have aggregate periods of unemployment during the one year period ending on the hiring date that equal or exceed six months.
- Ex-felons hired no later than one year after conviction or release from prison.
- Designated Community Resident – an individual who has attained ages 18 but not 40 on the hiring date who reside in an Empowerment Zone, Renewal Community, or Rural Renewal County.
- Vocational rehabilitation referrals, including Ticket Holders with an individual work plan developed and implemented by an Employment Network.
- Qualified summer youth ages 16 through 17 who reside in an Empowerment Zone, Enterprise Community, or Renewal Community.
- Qualified Food Stamp recipients ages 18 but not 40 on the hiring date.
- Qualified recipients of Supplemental Security Income (SSI).
- Long-term family assistance recipients.
Can family members qualify employers for the tax credit?
No tax credit can be claimed for wages paid to relatives. The tax credit is not valid for: son or daughter, stepson or stepdaughter, brother, sister, stepbrother or stepsister, father or mother, stepfather or stepmother, niece or nephew, uncle or aunt, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law, descendents of any of the aforementioned, or if the employee resides in the home of the employer.
Can a former employee be rehired and qualify the employer for the tax credit?
Employers may not request certification on former employees who have been rehired. The employee must have been WOTC-qualified and certified as such only the first time he/she was hired by the employer.
Do disabled veterans now qualify an employer for the tax credit?
If the disabled veteran is in receipt of payments from the Veteran’s Administration for a service connected disability AND
- Has a hiring date which is not more than one year after having been discharged or released from active duty, OR
- Has had aggregate periods of unemployment during the one year period ending on the hiring date that equal or exceed six months, they would qualify the employer for the tax credit.
Note: the qualified wages for (for disabled veterans ONLY) is increased from $6,000 to $12,000.
What is the amount of the credit available through WOTC?
The amount of the tax credit varies by target group. The tax credit for target groups A, B, C, D, E, G, and H is 40 percent of qualified first year wages up to $6,000 if the individual is retained for at least 400 hours. If the individual is retained less than 400 hours but at least 120 hours a 25 percent tax credit is available on qualified first year wages up to $6,000. The exception is target group F (summer youth). The maximum amount of wages to which the tax credit may be applied shall not exceed $3,000. The tax credit for target group I, long-term family assistance recipient, is 40 percent of first year qualified wages up to $10,000 and 50 percent of second year qualified wages up to $10,000. The individual must be retained at least 180 days or 400 hours. In certain circumstances you may be able to claim either the 40 percent of $6,000 tax credit or the 40 percent of $10,000 tax credit.
For which tax years can the credit be applied?
Employers may claim the Work Opportunity Tax Credit for a total of two years. Employers who do not take the full credit amount because of the tax liability limitation may carry back one year or forward 20 years.
How long must the individual remain on the job to provide the employer with a tax credit?
Target groups A through H have a two-tier retention period; 400 hours for a 40 percent tax credit, at least 120 hours but less than 400 hours for a 25 percent tax credit.
Target group I (long-term family assistance recipient) must be retained 180 days or 400 hours. The tax credits vary. See the question above, “What is the amount of the credit available through WOTC?” for more information.
What is the process for applying for WOTC?
The first step is pre-screening to determine eligibility. The job seeker or the employer must complete the Individual Characteristics Form, Work Opportunity Tax Credit, ETA 9061. The employer and the job seeker must complete the Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credits, Form 8850 and sign under penalty of perjury, attesting that the job seeker is a member of a target group. The employer may request certification for the WOTC by submitting the Form 8850 and the ETA 9061 to the EDD, either online or by mail. The Form 8850 must be submitted online or postmarked no later than the 28th day after the job seeker begins work.
There are two ways employers or their agent/consultant can submit their WOTC Requests for Certification:
1. Online with Work Opportunity Tax Credit Online (eWOTC)
2. By Mail
- Complete WOTC Forms and mail to the EDD’s WOTC Center.
- Mail all paper Requests for Certification to:
EDD WOTC Center
2901 50th Street
Sacramento, CA 95817-2399
Where can an employer obtain the Pre-Screening Notice, Form 8850 and Individual Characteristics Form, ETA 9061?
Where do you call to get more information?
You can call the California WOTC Processing Center toll-free at 1-866-593-0173. Work Opportunity Tax Credit (WOTC) representatives are available to assist you by phone, fax, mail, e-mail or online. Visit the Contact WOTC for more information.
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