The Work Opportunity Tax Credit (WOTC) is a federal income tax credit that encourages employers to hire six targeted groups of job seekers. The WOTC can reduce employer federal tax liability by as much as $2,400 per new hire.
The WOTC is designed to help job seekers most in need of employment gain on-the-job experience and move towards economic self-sufficiency. This employer tax incentive joins other employment program and targeted tax credit initiatives aimed at helping American workers and increasing American productivity and economic growth.
WHAT NEW HIRES CAN QUALIFY EMPLOYERS FOR WOTC?
* WOTC applies to new hires only.
* The new hire must belong to one of the following target groups:
Long-term TANF Recipient--A member of a family that:
- Received or recently received Temporary Assistance to Needy Families (TANF) payments for at least 18 consecutive months ending on the hiring date, or
- Received TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, and the earliest 18-month period beginning after August 5, 1997 ended during the past 2 years, or
- Stopped being eligible for TANF payments during the past 2 years because federal or state law limited the maximum time those payments could be made.
Other TANF Recipient -- members of a family that received Aid to Families with Dependent Children (AFDC) or its successor program, Temporary Assistance for Needy Families (TANF), (which is known as TAFI - Temporary Aid for Families in Need, in Idaho) for a total of at least nine of the 18 months before date of hire (the nine months do not have to be consecutive months),
Food Stamp Recipients-– 18-39 year old members of a family that received food stamps for at least six consecutive months before their date of hire, or for at least three of the five months before date of hire and their food stamp eligibility expired, who are able-bodied adults without dependents and are no longer eligible due to not meeting the work requirement of the Food Stamp Act of 1977,
Veterans--At least 180 days served, including dishonorable discharged and must have received food stamps for at least three consecutive months during the 15 months before date of hire,
Disabled Veterans--those who are entitled to compensation for a service-connected disability AND 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,
Vocational rehabilitation referrals--disabled persons who are employed within 2 years of their last date of service approved by a state or the U.S. Department of Veteran Affairs,
Ex-felons—individuals whose date of conviction or release is not more than 1 year prior to date of hire, or are currently enrolled in a work release program, and,
SSI Recipients -- individuals who received Supplemental Security Income benefits for any month during the 60 days before date of hire.
MINIMUM EMPLOYMENT OR RETENTION PERIOD
All new adult employees must work a minimum of 120 or 400 hours. The WOTC amount an employer may claim depends on the hours the employee works. The credit is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours and 40% for those employed 400 hours or more.
The consolidated WOTC for hiring most target group members can now be as much as:
- $2,400 for each new adult hire;
- $1,200 for each new summer youth hire,
- $4,800 for each new disabled veteran hire, and
- $9,000 for each new long-term family assistance recipient hired over a two-year period.