Welcome to the Employment Development Department

Employer Guide

The Employment Development Department is the Work Opportunity Tax Credit (WOTC) certifying agency for California employers.

For information on any of the following topics, you can scroll through this form, or click on the link in each topic. This WOTC Employer Guide and other WOTC forms and publications are also available as a downloadable PDF file.

The Purpose of the Work Opportunity Tax Credit (WOTC)

The Small Business and Work Opportunity Tax Act of 2007 extends the WOTC Tax Credit through August 31, 2011. The WOTC has two purposes

  • To promote the hiring of individuals who qualify as a member of a target group.
  • To provide a federal tax credit to employers who hire these individuals.

When you hire an individual who meets the criteria for this program, you may be able to claim federal tax credit against wages paid.

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Target Groups that Qualify for the WOTC

Individuals who are in one of the following nine target groups may qualify an employer for the WOTC:

  1. Qualified recipients of Temporary Assistance to Needy Families (TANF).
  2. 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.
  3. Ex-felons hired no later than one year after conviction or release from prison.
  4. 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.
  5. Vocational rehabilitation referrals, including Ticket Holders with an individual work plan developed and implemented by an Employment Network.
  6. Qualified summer youth ages 16 through 17 who reside in an Empowerment Zone, Enterprise Community, or Renewal Community.
  7. Qualified Food Stamp recipients ages 18 but not 40 on the hiring date.
  8. Qualified recipients of Supplemental Security Income (SSI).
  9. Long-term family assistance recipients.

A more complete description of the criteria for each group is available.

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Federal Tax Credit Amounts and Retention Periods for Target Groups A through H

The employee must be retained 400 hours for a 40 percent tax credit on qualified first year wages up to $6,000. For the employee that is retained at least 120 hours but less than 400 hours a 25 percent tax credit is available on qualified first year wages up to $6,000. The qualified summer youth (target group F) tax credit is based on qualified first year wages up to $3,000. Qualified wages (for disabled veterans only) was increased from $6,000 to $12,000.

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Federal Tax Credit Amounts and Retention Period for Target Group I

Long–term recipients of TANF/AFDC (target group I) provides for a tax credit of 40 percent on qualified first year wages up to $10,000 and 50 percent on second year qualified wages up to $10,000 for a total of a $9,000 tax credit. The employee must be retained a minimum of 400 hours to receive the full tax credit.

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Applicable Tax Years, Carry Back, and Carry Forward

Employers may claim the Work Opportunity Tax Credit for a total of two years. Employers who do not take the full credit amount of the Work Opportunity Tax Credit because of the tax liability limitation may carry back the unused credit one year and carry forward the unused credit 20 years or until all the credit is used, whichever comes first.

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Designating a WOTC Agent

If you wish to authorize an intermediary, such as an accountancy firm or a management consultant, to act on your behalf in the WOTC Certification process, you must provide to the EDD a notarized Power–of–Attorney. The Internal Revenue Service (IRS) Form 2848, Power–of–Attorney and Declaration of Employer Representative, may be used for this purpose. An acceptable equivalent document is the EDD Tax Branch From DE 48, Power–of–Attorney.

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Determining Eligibility

You must first determine if the applicant is willing to provide the required information. Prospective employees are not required to provide information of this sort to an employer. Their participation must be voluntary. If the applicant is willing to provide the required information, have him/her complete the Individual Characteristics Form, Work Opportunity Tax Credit ETA 9061. The Individual Characteristics Form, ETA 9061 must be completed on or before the applicant is offered employment.

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Requesting Certification

If you believe, based on the information provided on the Individual Characteristics Form, ETA 9061, that the job applicant meets the requirements for one or more target groups, complete all items on the Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit, Form 8850. If the applicant has a Conditional Certification, Work Opportunity Tax Credit, ETA 9062, potential eligibility has already been determined by the EDD or a participating agency. You do not have to complete the Individual Characteristics Form, ETA 9061. Complete the employer portion of the Conditional Certification, ETA 9062 and submit it with the Form 8850.

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Time Frame for Submitting the Form 8850

All such notices must be completed and signed under penalty of perjury by both the employer and the applicant ON OR BEFORE THE APPLICANT IS OFFERED EMPLOYMENT and must indicate the applicant's eligibility for a target group(s). The Form 8850 must contain the employer's name and Federal Tax Identification number, and the name, Social Security number, employment hire date and start date of the applicant for whom certification is requested. IT MUST BE SUBMITTED TO THE EDD NO LATER THAN THE 28th DAY AFTER THE APPLICANT STARTS WORK. Do not delay sending in the Form 8850. The Form 8850, with the ETA 9061, or the ETA 9062 attached, will serve as your request for a WOTC Certification and must not show any evidence of tampering with the applicant's responses.

Mail forms to:

EDD WOTC Center
2901 50th Street
Sacramento, CA 95817-2399
1-866-593-0173

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The WOTC Certification

If the applicant meets all the criteria, the WOTC Center will send you a Work Opportunity Tax Credit Certification, DE 8727. If the Form 8850 is timely but incomplete, the WOTC Center will notify you by mail and request the additional information necessary for making the WOTC eligibility determination. Otherwise, the WOTC Center will send you a letter denying your request for Certification and stating the reasons for the denial.

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Records Retention

The WOTC records, including application, pertinent forms, and supporting documentation, should be retained by the employer for five (5) years from the date of the written Certification from the EDD. Revoked or denied Certifications must be retained for at least one (1) year, but longer if further action or an appeal is pending. This time period conforms to the IRS "record retention required" for employment taxes, which specifies that records be kept for four (4) years after employment taxes are due.

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Requesting Assistance

For more information on WOTC, contact the WOTC Center at (866) 593-0173 (toll-free) or your local EDD Workforce Services site.

Forms are available through the Internet and your local EDD Workforce Services site.

Questions regarding how to claim the Work Opportunity Tax Credit on you federal income tax return should be directed to your regional office of the IRS.

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Penalties and Reviews

There are some possible perjury penalties for misrepresentation. The law provides for a fine and/or imprisonment for making false statements or withholding facts. In addition, the EDD is required to take corrective action as appropriate for those employers or employees who misrepresent information on the WOTC forms and publications. These actions may include, but are not limited to:

  • Criminal action for perjury violations.
  • Expansion of the eligibility audit for additional Certifications issued to an employer.
  • Increased documentation required for employers with high incidence of revoked Certifications.
  • The EDD will perform monthly reviews of ten percent of the Certifications issued in the previous 30 days to verify WOTC eligibility of the employees claimed on the Certifications. All Certifications found to be invalid will be revoked. A notice of invalidation will be sent to the employer and the local regional office of the IRS explaining the reason for revocation.

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Federal Empowerment Zones, Renewal Communities, and Rural Renewal Counties

Federal Empowerment Zones (EZ), Renewal Communities (RC), and Rural Renewal Counties (RRC) refer to an area or combination of areas meeting certain population, size and poverty criteria. These areas can be characterized as having pervasive poverty, unemployment and general distress.

California has a number of EZs, RCs, and RRCs. These include, but are not limited to:

  • Desert Communities
  • Fresno
  • Imperial County
  • Los Angeles
  • Oakland
  • Orange Cove
  • Parlier
  • San Diego
  • San Francisco
  • Santa Ana
  • Santa Cruz
  • Watsonville

Because only certain census tracts within a zip code area are in an Empowerment Zone, Renewal Community, or Rural Renewal County, not every summer or high-risk youth who resides in the areas indicated above are eligible for WOTC Certification.

For more information on EZ/RC/RRCs in California, or to look up an applicant's address within these areas, visit HUD's web site at HUD Address Locator.

If you do not have Internet connectivity, you may contact the Department of Housing and Urban Development (HUD) Information Center at 1-800-998-9999, and they will check the address for you.

EDD is an equal opportunity employer/program. Auxiliary services and assistance are available to persons with disabilities. TDD users can reach EDD through California Relay Service at 1-800-735-2929.