Work Opportunity Tax Credit (WOTC) Program

Transcription

1 Work Opportunity Tax Credit (WOTC) Program June 2011

2 The Work Opportunity Tax Credit (WOTC) program was created to provide employers with a federal tax credit as an incentive to hire job seekers in several target groups. 2

3 1996: The Work Opportunity Tax Credit (WOTC) Program was created by the Small Business Job Protection Act of : The Welfare-to-Work Tax Credit (WtWTC) was created by the Taxpayer Relief Act of : The WOTC & the Welfare to Work Tax Credit (WtWTC) continued as separate tax credits until Dec P.L repealed Sec. 51A of the Internal Revenue Code (IRC) by merging the WtWTC into the WOTC Program as another target group. 2007: Small Business and Work Opportunity Tax Act of 2007 was signed on May 25, This act extended the WOTC, for a 44-month period, through August 31, 2011, -- historically, the longest authorization ever. 3

4 2009: American Recovery and Reinvestment Act (ARRA) of (Recovery Act) 2009 was signed into law on February 17, adding two new target groups: 1. Unemployed Veterans, and 2. Disconnected Youth 2010: Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law on December 17, This act 1) extended the WOTC Program through December 31, 2011 and 2) reinstated retroactively the Empowerment Zone (EZ) or Renewal Community (RC) from January 1, 2010 through December 31, 2010 only. Metlakatla is the only EZ/RC in Alaska. 4

5 Former employees Family members or relatives of the employer Employees receiving On-the-Job-Training (OJT) payments Non-profits or governmental agencies 5

6 WOTC applies to new employees only New employee must belong to one of the following 11 targeted groups 6

7 A. Qualified Temporary Assistance for Needy Families (TANF) recipients B. Qualified veterans C. Qualified ex-felons D. Designated Community Residents E. Vocational Rehabilitation referrals F. Qualified summer youth G. Qualified Food Stamp recipients H. Qualified Supplemental Security Income (SSI) recipients I. Qualified long-term TANF recipients J. Unemployed veterans (added January 2009, ended 12/31/2010) K. Disconnected youth (added January 2009, ended 12/31/2010) 7

8 A member of a family that has received Temporary Assistance for Needy Families (TANF) through a program such as the Alaska Temporary Assistance Program (ATAP) for at least any 9 months of the 18 months ending on the hiring date. 8

9 a. Veteran and member of a family that received food stamps for at least 3 months within the last 15 months of hire. OR b. a Disabled Veteran entitled to compensation for a service-connected disability that is: hired within one year of discharge or release date, or unemployed 6 of the last 12 months to hire. 9

10 an individual who: was convicted of a felony under any state or federal law; AND Hired within one year of the date of conviction or release from prison. 10

11 an individual who is: between years old; AND resides in Empowerment Zones (EZs) or Renewal Communities (RCs) or Rural Renewal Communities (RRCs). 11

12 an individual who is: receiving rehabilitative services under an Individualized Plan for Employment (IPE) OR has completed an IPE within the last two years of hire date from a rehabilitation agency under a state plan or under a vocational rehabilitation program for veterans or an Employment Network under the Ticket-to-Work Program. 12

13 an individual who is: years old; AND worked for the employer between May 1 and September 15; AND has not been employed by the same employer before the 90 days between May 1 and September 15; AND resides in EZ or RC between May 1 and September

14 an individual who is: between years old; AND a member of a family that received Food Stamps (FS) for at least 6 months ending on the hiring date. 14

15 an individual who: received Supplemental Security Income (SSI) for any month during the 60 days ending on the hiring date. 15

16 A member of a family that received TANF for at least 18 consecutive months ending on the hiring date; OR Received any 18 months of benefits beginning after August 5, 1997 with the 18 th month payment falling within 2 years of hiring date; OR Became ineligible for TANF after August 5, 1997, if the family member is hired within two years after the family became ineligible. 16

17 Applies to workers who start work on January 1, 2009 through December 31, 2010 An individual who is considered a veteran under WOTC definition; AND Has been discharged from active duty within 5 years of hiring date; AND Received unemployment insurance compensation for at least four separate weeks (does not have to be consecutive) within one year of hiring date. 17

18 Applies to workers who start work on January 1, 2009 through December 31, 2010 An individual who is: between age 16 and 24 on the hiring date; AND during the past 6 months, has not attended or has not regularly attended any secondary, technical, or post-secondary school for more than an average of 10 hours per week, not counting periods during which the school was closed for scheduled vacation; AND during each consecutive 3-month period within the past 6 months, was not employed or was employed and earned an amount less than he or she would have earned working for the applicable minimum wage 30 hours every week during the 3-month period; AND does not have a certificate of graduation from a secondary school or a General Education Development (GED) certificate OR has a certificate that was awarded no less than 6 months prior to start date AND he or she has not held a job (other than occasionally) OR been admitted to a technical or post-secondary school since receiving the certificate. 18

19 Employee works at least 120 to 399 hours = 25% of the first $6,000 of earnings for a maximum credit of $1,500 Employee works 400 or more hours = 40% of the first $6,000 of earnings for a maximum credit of $2,400 19

20 In the following example, an employer hired four individuals that were certified WOTC target group members during the same tax year. Each individual worked more than 400 hours and earned at least $6, x $6,000 wages = $24,000 % rate x.40 Tax Credit Amount = $ 9,600 20

21 Target Groups % Credit & Retention Period Capped Wages up to Maximum Credit A, B (Veteran FS 1 ), C, D, E, G, H, J, & K 25% if work at least 120 hrs. $6,000 $1,500 (25% x $6,000) A, B (Veteran FS), C, D, E, G, H, J, & K 40% if work at least 400 hrs. $6,000 $2,400 (40% x $6,000) B (Disabled Vets 2 ) 25% if work at least 120 hrs. $12,000 $3,000 (25% x $12,000) B (Disabled Vets) 40% if work at least 400 hrs. $12,000 $4,800 (40% x $12,000) F (Summer Youth) 25% if work at least 120 hrs. $3,000 $750 (25% x $3,000) F (Summer Youth) 40% if work at least 400 hrs. $3,000 $1,200 (40% x $3,000) I (Long-Term TANF 3 Rec.) 1st yr. period - 40% if work at least 400 hrs. $10,000 $4,000 or 180 days (40% x $10,000) I (Long-Term TANF Rec.) 2nd yr. period - 50% if work at least 400 hrs. or 180 days $10,000 $5,000 (50% x $10,000) 1 Veterans receiving Food Stamps. 2 The cap on qualified first-year wages for DISABLED VETERANS was increased from $6,000 to $12,000 resulting in a bigger tax credit. 3 Employers hiring from this target group receive a two-year credit for each new hire for a combined tax saving of $9,

22 During 2010, Alaskan employers hired 1184 certified individuals. If the employee works the maximum hours and earned the maximum capped wages, potential savings on the employers federal income tax could be as much as $3.3 million dollars! 22

23 There are 2 forms employers must complete for each new employee: 1) IRS Form 8850, revised August 2009, Pre-screening Notice and Certification Request Must be submitted with ORIGINAL signatures and date (no exemptions) 2) ETA Form 9061* revised August 2009, Individual Characteristic Form * An ETA Form 9062 can be sent if the new hire was pre-certified. However, these forms can ONLY be issued by our partner agencies such as Vocational Rehabilitation or Public Assistance 23

24 Employers mail original forms to the WOTC Coordinator in Juneau within 28 calendar days after the employee s start date. Mailing Address: Alaska Department of Labor and Workforce Development WOTC Coordinator PO Box Juneau, AK

25 To be considered timely, the IRS Form 8850, along with the ETA 9061 or ETA 9062, must be submitted to the Juneau WOTC office no later than the 28 th calendar day* after the new employee s employment-start date. * When the last day of the 28 th calendar day period ends on a Saturday, Sunday or holiday, the next succeeding business day will be treated as the last day of the period (the 28 th day). 25

26 IRS Form 8850 Pre-Screening Notice and Certification Request Employee section Page 1 of 2 Click here to download form

27 IRS Form 8850 Pre-Screening Notice and Certification Request Employer section Page 2 of 2

28 ETA 9061 Individual Characteristics Form Page 1 of 2 Click here to download form

29 ETA 9061 Individual Characteristics Form Page 2 of 2

30 ETA Form 9062 Conditional Certification Client service providers such as Public Assistance or Vocational Rehabilitation will provide job applicants with partially completed ETA Form 9062, Conditional Certification, identifying them as a member of a WOTC target group, and partially completed IRS Form Job applicants will give these forms to potential employers. When the applicant is hired, employer must complete items

31 If the application is certified, the AK DOLWD will send ETA Form 9063, WOTC Employer Certification, to the employer to verify that the employee is WOTC eligible and may qualify the employer for the federal tax credit. The employer must retain the form for IRS records. The employer will receive a denial letter if the employee is not eligible for any target groups. 31

32 Form 9063 WOTC Certification form SAMPLE

33 The employer needs to file the Tax Credit Certification issued by the WOTC office along with the IRS Form 5884, Work Opportunity Credit, to claim their WOTC tax credit when filing their annual Business Federal Income Tax Forms. For assistance with questions regarding the filing of tax credits, contact the Internal Revenue Services (IRS) online at or via their toll-free help line at 1(800)

34 Alaska Department of Labor and Workforce Development WOTC program Web: jobs.state.ak.us/wotc.htm Telephone: (907) Fax: (907) Mail: Alaska Department of Labor and Workforce Development Employment Security Division WOTC Coordinator P.O. Box Juneau, AK US Department of Labor, Work Opportunity Tax Credit: Web: doleta.gov/business/incentives/opptax/ Internal Revenue Service (IRS): Web: irs.gov 34

35 ETA Form 9061, Individual Characteristic Form IRS Form 8850, Pre-Screening Notice and Certification Request ETA Form 9154, Disconnected Youth Self-Attestation Form Revised May 2010 English Version ETA Form 9151, Disconnected Youth Self-Attestation Form Revised May 2010 Spanish Version IRS Form 5884, Work Opportunity Credit WOTC Employer Guide 35

36 This presentation has been provided to you by the Alaska Department of Labor and Workforce Development s Work Opportunity Tax Credit (WOTC) program. Thank you for your interest in our programs and services.