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Focus on Taxation: Time Sensitive Opportunity - Work Opportunity Tax Credit (WOTC) Extension for 2015 and 2016

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WOTC is a federal credit for employers that hire individuals from targeted groups and is currently extended through December 31, 2019. Back in March, the IRS issued guidance and transition relief with Notice 2016-22 as a result of the PATH Act extending the WOTC retroactively for 2015 and adding a new targeted group for Long-Term Unemployed Recipients effective January 1, 2016.
July 5, 2016

WOTC is a federal credit for employers that hire individuals from targeted groups and is currently extended through December 31, 2019. Back in March, the IRS issued guidance and transition relief with Notice 2016-22 as a result of the PATH Act extending the WOTC retroactively for 2015 and adding a new targeted group for Long-Term Unemployed Recipients effective January 1, 2016. Among the most common targeted groups are veterans, Designated Community Residents and TANF/SNAP/SSI recipients. Credits range from $1,200 - $9,600 per employee, with the average credit being $1,200 - $3,000 per employee. Applicable forms for the new long-term unemployed category are currently being revised.

The IRS recently extended transition relief for another three months with Notice 2016-40. Jointly, the Department of Labor also issued Training and Employment guidance Letter Number 25-15, (TEGL) addressing the same issues. This notice lifts the 28-day requirement for submitting IRS Form 8850 for employees hired between January 1, 2015 and before August 31, 2016. The deadline for submitting applications has been further extended until September 28, 2016. Prior to these notices, employers were required to submit IRS Form 8850 to the appropriate state workforce agency no later than 28 days from the employee’s first day of work.

Although the application deadline has been extended, the employer must still receive a certification before claiming the credit.

This is great news for all employers, whether you are currently taking advantage of the program or considering participation in the program. It affords additional time to screen all employees hired on or after January 1, 2015 and before August 31, 2016 for potential credits.

If you have questions or would like additional information, please contact a member of RubinBrown's SALT group.

Access to IRS Notice 2016-40.

Access to DOL TEGL 25-15.

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

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