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Work Opportunity Tax Credit Set to Expire Dec. 31

11.16.2017

The Work Opportunity Tax Credit (WOTC) helps businesses provide employment opportunities to certain groups that may face challenges getting hired. The credit may not be available for hires made after this year.

As released by the Ways and Means Committee of the U.S. House of Representatives on November 2, the Tax Cuts and Jobs Act would eliminate the WOTC for hires after December 31, 2017. So you may want to consider hiring qualifying individuals before year end.

The WOTC up close

You can claim the WOTC for a portion of wages paid to a new hire from a qualifying target group, including:

  • Unemployed veterans (including disabled veterans)
  • Temporary assistance for needy family recipients 
  • Food stamp recipients 
  • Qualified residents living in Empowerment Zones or Rural Renewal Counties 
  • Ex-felons
  • Supplemental security income recipients
  • Qualified long-term unemployment recipients
  • Summer youth employees living in Empowerment Zones

The maximum credit depends in part on which of these factors apply:

  • Food stamp recipient or short-term unemployed (at least 4 weeks but less than 6 months): $2,400
  • Disabled: $4,800
  • Long-term unemployed (at least 6 months): $5,600
  • Disabled and long-term unemployed: $9,600

The amount of the credit also depends on the wages paid to the employee and the number of hours the employee worked during the first year of employment.

You aren’t subject to a limit on the number of eligible individuals you can hire. For example, if you hire 10 disabled long-term-unemployed veterans, the credit can be as much as $96,000.

Other considerations

Before claiming the WOTC, you generally must obtain certification from a “designated local agency” (DLA) that the hired individual is indeed a target group member. You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to the DLA no later than the 28th day after the individual begins work for you.

Looking ahead

It’s still uncertain whether the WOTC will be repealed. The House bill likely will be revised as lawmakers negotiate on tax reform, and it’s also possible Congress will be unable to pass tax legislation this year. Under current law, the WOTC is scheduled to be available through 2019.

Contact us for more information on the WOTC or on other year-end tax planning strategies in light of possible tax law changes.

Team

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