The Work Opportunity Tax Credit is a federal credit available to private-for-profit employers who hire from specific targeted groups of people that have in the past experienced difficulty in securing employment in the past. For the first year of employment, WOTC allows maximum credits of $4,800 to $9,600 for disabled veterans, $4,000 for long-term recipients of Temporary Assistance to Needy Families (TANF), and $2,400 for all other target groups. There is an additional $5,000 credit for long-term TANF recipients who are employed for a second year. The maximum credit amounts for tax-exempt organizations can vary from $1,560 to $6,240. The credit, or any unused portion of the credit, can be carried back one year or forward 20 years from the year in which the employer claims the credit.
The VOW to Hire Heroes Act of 2011 changed the Work Opportunity Tax Credit (WOTC) program by adding two new categories to the existing qualified veteran targeted group. In addition to the employers that can currently benefit from the WOTC, certain tax-exempt employers can also apply for the credit if they hire a qualified veteran. The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work after November 21, 2011.
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) that extends the Work Opportunity Tax Credit (WOTC) retroactively for hires from December 31, 2014 to December 31, 2019. The PATH Act also modified WOTC to include a new target group, a Qualified Long-term Unemployment Recipient, which is defined as any individual who is certified by the designated local agency as being in a period of unemployment which –
Qualified "tax-exempt" organizations are eligible to claim the WOTC for a credit of up to $6,240 if their new hire meets the criteria for the Qualified Veteran target group.
A new hire qualifying as a member of at least one of the Work Opportunity target groups must also work at least 120 hours for the employer to claim a 25% credit and at least 400 hours for the employer to claim a 40% credit on the first gross wages paid in the first year of employment.
WORK OPPORTUNITY TARGET GROUPS
(a) Veteran SNAP (food stamp) recipient: Must be a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a 3-month period during the 15-month period ending on the hire date; OR
(b) Disabled veteran: Must be entitled to compensation for a service-connected disability and is hired not more than 1 year after discharge or release from active duty in the U.S. Armed Forces; OR
(c) Disabled and unemployed veteran: Must be entitled to compensation for a service-connected disability and has received unemployment compensation for aggregate periods totaling at least 6 months during the 12 months prior to hire; OR
(d) Unemployed veteran: Must have received aggregated periods of unemployment compensation totaling at least 4 weeks, but less than 6 months, during the 12 months prior to hire; OR periods of unemployment compensation totaling 6 months or more in the 12 months prior to hire.
Qualified long-term unemployment recipient: any individual who is certified by the designated local agency as being in a period of unemployment which –
Eligible new hires cannot have any prior work history with the employer, cannot be a relative of the employer and must be a U.S. citizen or permanent resident.
APPLYING FOR THE WORK OPPORTUNITY TAX CREDIT
When applying for the credit, the employer must submit to the UIA two forms for each newly hired employee who may qualify as a target group member. Forms are available on the UIA’s website or by calling the agency’s WOTC Unit toll free at 1-800-482-2959.
SPECIAL NOTE: Application processing is faster when UIA receives a timely and correctly completed package that includes IRS Form 8850, ETA Form 9061 and documentation supporting the employee’s target group membership.
For expedited processing of your WOTC application, reduced paperwork and mailing, applications may be submitted online through the Michigan Web Account Manager (MiWAM) at michigan.gov/uia. For Step by step instructions on how to apply for WOTC using MiWAM, download the MiWAM Toolkit for WOTC at michigan.gov/uia.
WOTC RESOURCES AND FORMS
Want More Information On The Tax Credit?
Call the WOTC Unit toll-free at 1-800-482-2959
or 313-456-2105 if out of state; or e-mail us at WOTCUnit@michigan.gov.