Extended Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) allows employers to claim a tax credit for hiring members of certain "targeted groups." A recent tax law expanded the list of targeted groups to include the "long-term unemployed" and also extended the WOTC's application to qualified employees who begin work for the employer before January 1, 2020.

Tax CrditCredit Amount

The credit is equal to a percentage of first-year wages. The maximum amount of credit-eligible wages is generally $6,000 per employee. The wage limit is $3,000 for qualified summer youth employees. For qualified veLerans, the wage limit ranges [rom $6,000 to $24,000, depending on certain factors.

Targeted Groups

Targeted groups fall into 10 separate categories, including qualified veterans, vocational rehabilitation referrals, and other individuals receiving specific types o[ governmenL benefiLs. The newly added long-term unemployed category applies to individuals hired after 2015 who have had a period of unemployment of aL least 27 consecutive weeks. During that time, the individual must have received unemploymenL compensation paid under state or federal law.

Certification Requirement

A qualifying new employee must be certified as a member of a targeted group by the appropriate State Employment Security Agency (SESA) . The employer may either obtain the certification by the day the employee begins work or complete a prescreening noLice by the date the job is offered and submit it to SESA within 28 days after the employee begins work.

Tax-exempt Entities

Tax-exempt entities may claim the WOTC (at reduced percentages) for hiring qualified veterans. If allowed, the credit is applied against Social Security taxes paid for all employees during the applicable period . • * The Protecting Americans from Tax Hikes Act of 2015

2016 Sep Pg 04