What is it?
The Work Opportunity Tax Credit (WOTC) expansion program provides a credit to businesses that hire eligible veterans. That’s good news for your bottom line and for hiring veterans too. Under the PATH Act, the WOTC is available for qualified new-hires going back to 2015 and forward through 2019.
What does a business owner get?
Generally, a business owner would receive credit for an employee working at least 10 hours is equal to 25 percent of first-year wages up to $6,000 for a maximum credit of $1,500. For an employee working at least 400 hours, the credit is equal to 40 percent of first-year wages up to $6,000 for a maximum credit of $2,400.
Which employees are eligible?
There are great opportunities for small business owners to take advantage of the tax credit for VETERANS. Moreover, it provides meaningful employment to veterans when they return from military service. If this is something you are considering for your small business, please talk to us first! Get every benefit you can by making sure you structure it correctly.
A qualified veteran is a veteran certified as any of the following:
- A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least 3 months during the first year of employment.
- Unemployed for a period totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period prior to the date of hire.
- Unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the one-year period ending on the date of hire.
- Entitled to compensation for a service-connected disability and hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces.
- Entitled to compensation for a service-connected disability and unemployed for a period totaling at least six months (whether or not consecutive) in the one-year period that ended on the date of hire.
Who else is eligible for Work Opportunity Tax Credit (WOTC)?
Prior to the PATH Act, the list of target groups included the following:
- Unemployed Veterans (including disabled veterans)
- Temporary Assistance for Needy Families (TANF) Recipients
- Food Stamp (SNAP) Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referred Individuals
- Supplemental Security Income Recipients
- Summer Youth Employees (living in Empowerment Zones)
The PATH Act also established a new target group of long-term unemployment recipients:
- Individuals who are unemployed for not less than 27 consecutive weeks.
- They have received unemployment compensation for a period of time under federal or state law.
- This new category is effective for employees who begin work after December 31, 2015.
By filing Form 8850 (Pre-Screening Notice and Certification Request) with the Department of Labor (DOL), an employer must obtain certification that a new-hire is a member of a targeted group. File Form 8850 within 28 days after the individual begins work. Initially, the IRS granted employers more time to meet the filing requirements, due to the enactment of the PATH Act late last year (Notice 2016-22). Now it is postponing the deadlines a little longer (Notice 2016-40).
What dates are applicable?
Between dates December 31, 2014 and before January 1, 2020, the PATH Act of 2015 retroactively allows eligible employers to claim the Work Opportunity Tax Credit for all targeted group employee categories that were in effect prior to the enactment of the PATH Act. For tax-exempt employers, the PATH Act retroactively allows them to claim the Work Opportunity Tax Credit (WOTC) for qualified veterans who begin work for the employer after December 31, 2014 and before January 1, 2020.