The Work Opportunity Tax Credit (WOTC) is a federal tax credit that encourages employers to hire workers from nine target groups. The tax credit is designed to help job seekers gain on-the-job experience, move towards economic self-sufficiency, and help reduce employers federal tax liability.
WOTC Updates
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, 2020. The Employment and Training Administration (ETA) and the Internal Revenue Service (IRS) will be issuing formal guidance soon and updating WOTC forms as needed.
The PATH Act amends Section 51(c)(4) of the Internal Revenue Code of 1986. In summary, Title I—“Extenders,” Subtitle B—“Extensions Through 2019,” Section 142, “Extension and Modification of Work Opportunity Tax Credit,” of this Act:
- Retroactively reauthorizes the WOTC program with all its current target groups, without changes or new provisions, for a 5-year period, after December 31, 2014 to December 31, 2019
- Introduces 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
- Is not less than 27 consecutive weeks, and
- Includes a period in which the individual was receiving unemployment compensation under State or Federal law
- IRS Notice 2016-22 is available here: https://www.irs.gov/pub/irs-drop/n-16-22.pdf
The 1996 legislative provisions that apply to most adult non-veteran target groups for “qualified wages” and amount of the tax credit employers can claim for new hires certified under those target groups also apply to the new target group employees hired after December 31, 2015. Qualified wages for certified new hires under the new Qualified Long-term Unemployment Recipient target group are also capped at $6,000 dollars, during the first year of employment, for a maximum tax credit of up to $2,400 depending on the number of hours the new hire works (how they meet the provisions of the Minimum Employment or Retention Period).
WOTC Target Groups
The employer must hire from among the following groups of job seekers to qualify for the Work Opportunity Tax Credit.
Please note that to be considered a veteran eligible for WOTC, an individual must meet these two standards:
1. Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability.
2. Not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hire date.
A
Request for Verification MUST accompany the application.
| Target Group
|
Description
|
Target Group 2Ba
Maximum Tax Credit
$2,400
|
Veteran receiving SNAP:
A Veteran who is member of a household that received SNAP benefits (food stamps) for at three consecutive months during the 15 month period prior to the hire date.
|
Target Group 2Bb
Maximum Tax Credit
$4,800
|
Veteran Disabled Discharged (within year):
A Veteran who is entitled to compensation for a service-connected disability AND has a hire date within 1 year of discharge or release from active duty.
|
Target Group 2Bc
Maximum Tax Credit
$9,600
|
Veteran Disabled and Unemployed:
A Veteran who is entitled to compensation for a service-connected disability AND was unemployed at least 6 months during the year ending on the hire date.
|
Target Group 2Bd
Maximum Tax Credit
$2,400
|
Veteran Unemployed 4 weeks:
A Veteran who was unemployed at least 4 weeks, but less than 6 months during the year prior to the hire date.
|
Target Group 2Be
Maximum Tax Credit
$5,600
|
Veteran Unemployed 6 months:
A Veteran who was unemployed at least 6 months during the year prior to the hire date.
|
Determine that the individual satisfies the definition of veteran(Having served on active duty for a period of more than 180 days or having been discharged or released from active duty for a service connected disability);
- DD214, or
- Fl 21-802 (Issued only DVA, certifies a Veteran with a service-connected disability), or
- Discharge papers
| Target Group
|
Description
|
Target Group C
Maximum Tax Credit
$2,400
|
Ex-Felon:
An individual who has been convicted of a felony within 1 year prior to the hire date.
|
Target Group C
Maximum Tax Credit
$2,400
|
Ex-Felon:
An individual who has been convicted of a felony AND has release date from prison within 1 year prior to the hire date.
|
Target Group C
Maximum Tax Credit
$2,400
|
Ex-Felon:
An individual charged with a felony but received “deferred adjudication” (without a finding of guilty, but only if the court considers this to have been a “conviction”) AND was placed on probation within 1 year prior to the hire date.
|
Target Group D
Maximum Tax Credit
$2,400
|
Designated Community Resident:
An 18-39 year old who resides in a designated Rural Renewal County.
|
Target Group D
Maximum Tax Credit
$2,400
|
Designated Community Resident:
An 18-39 year old who resides in a designated Empowerment Zone.
|
Target Group E
Maximum Tax Credit
$2,400
|
Vocational Rehabilitation Referral:
An individual with a disability who completed or is completing rehabilitative services from a state-certified agency.
|
Target Group E
Maximum Tax Credit
$2,400
|
Ticket to Work Referral:
An individual with a disability who completed or is completing rehabilitative services from an Employment Network under the Ticket to Work program.
|
Target Group F
Maximum Tax Credit
$1,200
|
Summer Youth Employee:
A 16 or 17 year-old youth who works for the employer between May 1 and September 15 and resides in an Empowerment Zone.
|
Target Group G
Maximum Tax Credit
$2,400
|
SNAP (Food Stamp) Recipient:
An 18-39 year old who is a member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for the 6 month period ending on hire date.
|
Target Group G
Maximum Tax Credit
$2,400
|
SNAP (Food Stamp) Recipient:
An 18-39 year old who is a member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits at least 3 months out of the 5-month period ending on the hire date, but has been determined ineligible to participate in the SNAP Program as the result of a failure to comply with the work requirements (Able-Bodied Adult without Dependents).
|
Target Group H
Maximum Tax Credit
$2,400
|
Supplemental Security Income (SSI) Recipient:
A recipient of SSI benefits for any month ending within the 60-day period ending on the hire date.
|
Target Group A
Maximum Tax Credit
$2,400
|
Short-term TANF Recipient:
A family that received TANF benefits for 9 months (whether or not consecutive) during the 18 months ending on the hire date.
|
Target Group I
Maximum Tax Credit
$9,000
|
Long-term Family Assistance Recipient (TANF):
A member of a family that received TANF benefits for 18 consecutive months ending on the hire date.
|
Target Group I
Maximum Tax Credit
$9,000
|
Long-term Family Assistance Recipient (TANF):
A member of a family that received TANF benefits for at least 18 months (whether or not consecutive) and has a hire date that is not more than 2 years after the end of the earliest 18-month period after August 5, 1997.
|
Target Group I
Maximum Tax Credit
$9,000
|
Long-term Family Assistance Recipient (TANF):
A member of a family that received TANF benefits but stopped being eligible for TANF due to a Federal or state law that limits the maximum time payments could be made during the 2 years prior to the hire date.
|
Target Group L
Maximum Tax Credit
$2,400
|
Long-term Unemployment Recipient:
An individual who is certified by the designated local agency as being in a period of unemployment for more than 27 consecutive weeks and includes a period in which the individual was receiving unemployment compensation under state or federal law.
|
How to Apply
1. Complete IRS Form 8850 by the day the job offer is made.
2. Complete Employment and Training Administration (ETA) Form 9061.
3. Submit the completed and signed IRS form 8850 and ETA form 9061 via:
E-file: https://ewotc.dws.state.nm.us/
Mail: New Mexico Department of Workforce Solutions
Work Opportunity Tax Credit (WOTC) Unit
P.O. Box 1928
Albuquerque, NM 87103
Forms must be submitted within 28 calendar days of the employee's start date. The NMDWS WOTC Unit encourages online applications.
You will be notified of the final determination by the NMDWS WOTC Unit. The determination will indicate whether the employee is certified as meeting the eligibility requirements for one of the WOTC target groups.
4. After the target group employee is certified by the NMDWS WOTC Unit, contact the IRS to file for the tax credit.
If you have questions about this process, please contact the New Mexico WOTC coordinator.
How Much is the Tax Credit?
The tax credit for hiring Long-Term Family Assistance Recipients is 40% of the first $10,000 of wages in the first year and 50% of first $10,000 of wages in the second year. The Tax Credit for hiring other target groups (except summer youth employees) is up to $2,400 for each new hire; 40% of qualified first year wages for those employed 400 or more hours; 25% for those employed at least 120 hours (but less than 400). Qualified wages are capped at $6,000; summer youth wages are capped at $3,000.
Who Should Complete and Sign the Form?
The job applicant gives information to the employers on or before the day a job offer is made. This information is entered on Form 8850. Based on the applicant’s information, the employer determines whether or not he or she believes the applicant is a member of a targeted group (as defined under Members of Targeted Groups). If the employer believes the applicant is a member of a targeted group, the employer completes the rest of the form no later than the day the job offer is made. Both the job applicant and the employer must sign Form 8850 no later than that date for submitting the form to the New Mexico Department of Workforce Solutions.
Information must be postmarked within 28 days of employee’s employment start date. The 8850 cannot be faxed; the original must be mailed.
Employers can only get a tax credit if they receive certification from the New Mexico Department of Workforce Solutions.
Request for certification may be submitted to: