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The Work Opportunity Tax Credit, or WOTC, gives employers a tax reason to hire people who’ve had a hard time finding work.
But like most tax matters, the WOTC comes with deadlines. One of those is fast approaching.
The due date for some companies that hired qualifying workers in 2015 and the first 8 months of this year is Wednesday, Sept. 28.
Special one-time deadline
Employers who have hired workers covered under one of the Work Opportunity Tax Credit’s employee categories must get those workers certified by the Internal Revenue Service. That’s the first step.
Once the tax agency certifies that a company has hired individuals who meet WOTC requirements, the business then can claim the WOTC on its income tax return.
But without first getting that official IRS imprimatur, the company can’t claim the WOTC.
Normally, that tax credit certification request by filing Form 8850 is required within 28 days after the eligible employee begins work.
But since Congress delayed extending the WOTC and its provisions were made retroactive, a new one-time deadline was created.
The IRS now is giving qualifying employers until Sept. 28 to file certification requests for eligible workers they hired any time in 2015 and during the first eight months of 2016.
Qualifying worker categories
The WOTC typically gets a lot of attention because it offers a tax break to companies that hire unemployed veterans, including disabled former members of the military.
But the renewal of the WOTC also now provides businesses a tax break when they put people on their payrolls who previously were out of work for at least 27 weeks and received state or federal unemployment benefits during part or all of that time.
The other categories of WOTC-eligible workers include:
- Some recipients of Temporary Assistance for Needy Families, or TANF, benefits.
- Former felons.
- Designated community residents living in Empowerment Zones or Rural Renewal Counties.
- Vocational rehabilitation referrals.
- Summer youth employees living in Empowerment Zones.
- Long-term family assistance recipients.
- Supplemental Security Income, or SSI, recipients.
- Recipients of food stamps, known as Supplemental Nutrition Assistance Program, or SNAP.
Hiring tax help
Hiring employees is one of the most critical, and often one of the most risky, tasks a business takes.
But if your company is willing to take a chance on a person who is in a special category that sometimes makes it hard to find work, Uncle Sam thanks you, both figuratively and literally with the WOTC.
Make sure you don’t miss his indication of gratitude and file for qualifying WOTC worker certification by Sept. 28.
Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York. He provides guidance and strategies to improve clients’ financial well-being.