The IRS has provided employers with additional time to obtain the certification necessary to claim the Work Opportunity Tax Credit (WOTC), which was retroactively extended by the Tax Increase Prevention Act of 2014 to December 31, 2014. Employers have the potential of claiming up to a $9, 600 WOTC per qualified employee. The WOTC is now available for 2014 for businesses that hired employees in one of the following targeted groups (For qualified tax-exempt organizations, the WOTC may only be claimed for qualified veterans):
- Qualified veterans (Click here for further information regarding who is considered a “qualified veteran”)
- Qualified Temporary Assistance to Needy Families recipients, including certain long-term family assistance recipients
- Qualified ex-felons
- Designated community residents
- Qualified summer youth employees
- Vocational rehabilitation referrals
- Qualified Supplemental Nutrition Assistance Program (SNAP) recipients
- Qualified supplemental security income (SSI) recipients
In order to claim the WOTC for a new employee, an employer must obtain certification from a designated local agency (DLA) that the employee is a member of a targeted group on or before the day the individual begins work.
If a certificate was not obtained from a DLA, an employer can still take advantage of the WOTC on their 2014 federal income tax return if a “Pre-Screening Notice and Certification Request for the Work Opportunity Credit” is filed no later than April 15, 2015.
Employers that already have filed their tax returns will need to file amended tax returns to claim the WOTC for any newly certified employees.
It remains to be seen if the WOTC will be extended again by Congress. The Department of Labor has issued guidance stating that DLAs can accept Forms 8850 filed for qualifying hires during 2015, but the claims will not be processed unless the WOTC is extended. Employers should continue to obtain and submit certifications for 2015 in case the WOTC is extended retroactively.
If you have questions regarding any of the information shared in this article, please contact us.
Written by: Jeff McCurry, CPA
Jeff McCurry is a manager in the tax department of Thompson Greenspon. He is responsible for the review of Federal and multi-state tax returns, as well as tax compliance and planning strategies for a variety of clients, including government contractors, professional service firms, closely-held businesses and individuals. Prior to joining the firm, Jeff gained 12 years of experience working for a mid-sized regional CPA firm.
Jeff holds a Bachelor’s degree in Accounting from Virginia Tech. He is a member of the American Institute of Certified Public Accountants, the Virginia Society of Certified Public Accountants, and serves as Treasurer of the Greenbriar Pool.