Hire Workers Before 2014 to Qualify for WOTC

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 The Work Opportunity Tax Credit (WOTC) allows employers who hire members of certain targeted groups before January 1, 2014 to  get a credit against income tax of 40% of first-year wages up to a maximum amount. The maximum amount of first-year wages  is generally  $6,000 per employee, but the limit is only $3,000 for  qualified summer youth employees and various  amounts for qualified veterans.  The credit percentage is 25% for employees who have completed at least 120 hours, but less than  400 hours of  service for the employer.   Where the employee is a long-term family assistance (LTFA) recipient, the maximum WOTC is $9,000.

The targeted worker groups are: qualified IV-A recipients (qualified recipients of aid to families with dependent children or successor program); qualified veterans; qualified ex-felons; designated community residents;  vocational rehabilitation referrals; qualified summer youth employees; qualified supplemental nutrition assistance program (SNAP) recipients; qualified SSI recipients; and long-term  family assistance recipients, i.e., members of a family that receives or  received assistance under a IV-A program for a minimum period of time.  No WOTC is allowed for employees who are related to the employer or to certain owners of the employer.

The amount of first-year wages taken into account in computing the WOTC for qualified veterans is:

    (a) $6,000 for a veteran who is a member of a family receiving assistance under a food stamp program for at least three months (maximum credit of $2,400);
    (b) $12,000 for a veteran with a service-connected disability (maximum credit of $4,800);
    (c) $24,000 for a veteran with a service-connected disability who has aggregate periods of unemployment of six months or more (maximum credit of $9,600);
    (d) $6,000 for a veteran who has aggregate periods of unemployment which equal or exceed four weeks (maximum credit of $2,400); and
    (e) $14,000 for a veteran who has aggregate periods of unemployment of six months or more(maximum credit of $5,600).

Wages paid (1) for federally funded on-the-job training  and (2) to an individual who performs the same or substantially similar services as those of employees participating  in or affected  by a strike or lockout at the employer's plant don't qualify for the credit.

To be eligible for the WOTC, a new employee must be certified as a member of a targeted group by a State Employment Security Agency (SESA). In general, the employer can either get the certification by the day the prospective employee  begins work  or complete a pre-screening notice (use Form 8850) for the employee by the day he is offered employment, and submit it to the SESA as part of a request for certification within  28 days after the employee begins work.

If you have any questions about the WOTC, please contact one of our tax or business attorneys at 937-223-1130 or Jsenney@pselaw.com.
AND ONE MORE THING.  The work opportunity tax credit (WOTC) is a valuable tax break for businesses that hire workers from certain targeted groups. However, under current law, qualifying employee hires must begin work for the employer before January 1, 2014.  Although the United States Congress may extend the WOTC, it's not a certainty.   So if you are planning to add workers, and you are thinking of hiring WOTC-eligible employees, you should make the hire before January 1, 2014 so you can ensure you get the tax credit.  It makes sense not to wait until the last minute, because the process of getting eligible workers certified can be somewhat involved.  Contact me at 937-223-1130 or Jsenney@pselaw.com if you would like to discuss this further.