Give Yourself Credit For Hiring!November 19, 2013
Bruce A. Desrosiers, CPA, MST
Employers considering hiring or who hire on a continuous basis should give themselves some credit. The Work Opportunity Tax Credit (WOTC) allows an employer a credit of $1,200 to $9,600 per employee hired from certain targeted groups. The credit is based on wages paid to these targeted new hires and the group in which they qualify. Hiring veterans may qualify for the higher credit amounts if the veteran meets certain criteria. The credit for hiring a veteran can be as high as $9,600. Although the credit is generous, there are some requirements associated with it. Proper planning in the hiring process is necessary to meet all of the requirements efficiently.
Here are the steps you should take to receive the credit:
Have any potential new hire fill out and sign Form 8850 indicating that they are a member of one of the targeted groups before making the hiring decision. This step can be completed in conjunction with an application for employment. Targeted groups include:
- Qualified Temporary Assistance for Needy Families (TANF) recipients
- Qualified veterans
- Qualified ex-felon
- Designated community resident
- Vocational rehabilitation referral
- Summer youth employee
- Recipient of Supplemental Nutrition Assistance Program (SNAP) benefits
- Supplemental Security Incomes (SSI)recipient
- Long-term family assistance recipient
Complete and sign the employer section of the form after the date of hire. The employer must also complete either Form ETA 9061 or ETA 9062; which expands on the general qualifications of the employee.
Forward Forms 8850 and ETA 9061 or 9062 to the respective State Workforce Agency responsible for certification of the new hire’s inclusion in a targeted group. Forms must be submitted within 28 days of the hire date. The certification in each state is performed by the State WOTC Coordinator.
The new hire must work at least 120 hours in the first year following their date of hire. The new hire cannot be a past employee, a dependent or a relation. More than 50% of the wages paid must be for work performed in your trade or business.
Claim the credit on Form 5884 (5884-C for non-profits). Non- profits may use the credit as an offset to the tax liability on Form 941. Additionally, the credit may be used to offset the alternative minimum tax. The credit is available until December 31, 2013, but may be extended by year- end legislation. The tax professionals at BlumShapiro are always available to help you with any questions you might have.
The state WOTC Coordinators for southern New England states are as follows:
Dept. of Labor & Training
1511 Pontiac Avenue
Cranston, RI 02920-4407
Rhode Island WOTC webpage
Department of Labor
Work Opportunity Tax Credit Unit
200 Folly Brook Boulevard
Wethersfield, CT 06109
Connecticut WOTC webpage
Division of Employment & Training
19 Staniford Street, 1st Floor
Boston, MA 02114
Massachusetts WOTC webpage
If you have any additional questions, please contact Bruce Derosiers at firstname.lastname@example.org .
Disclaimer: Under U.S. Treasury Department guidelines, we hereby inform you that (1) any tax advice contained in this communication is not intended or written to be used, and cannot be used by you, for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service (or state and local or other tax authorities), and (2) no part of any tax advice contained in this communication is intended to be used, and cannot be used, by any party to promote, market or recommend any transaction or tax-related matter(s) addressed herein without the express and written consent of Blum, Shapiro & Company, P.C.