The Work Opportunity Tax Credit Extended

Hiring people with significant barriers to entering the workforce could earn a tax credit for your business. The credit is for each qualifying hire and is available through the Work Opportunity Tax Credit (WOTC), which was extended through 2025.

Targeted Groups to Hire

The purpose of this program is to entice business owners to hire people from 10 target groups. You can usually obtain a list of potential applicants through your state workforce agency.

There is no limit to the number of new team members you can hire to qualify for the credit. However, there is a requirement that the new hires work a specified number of hours. Your tax professional can provide more information.

How to Qualify a Worker

Before claiming the credit, employers must apply for and receive a certification, verifying that the new hire is a targeted group member. This is done by completing IRS Form 8850 and a Federal Department of Labor Form 9061, which is then submitted to your state workforce agency. Keep in mind that both the potential new hire and the employer must sign these forms, and they should be forwarded to your state within 28 days of the employee's start date. If your new hire qualifies for the WOTC targeted group, you'll receive a certification from the state workforce agency.

Apply for the Credit

Once an employee is deemed qualified, you must submit an application for the credit to the IRS along with the business's or owner's tax return. The credit amount is based on the category of workers, the hours worked and wages paid to them in their first year. Most employers will then claim the WOTC as a general business credit against their income taxes.