Work Opportunity Tax Credit Available to Help Employers Hire Workers

Are you having trouble hiring workers lately? The IRS wants to remind employers to check the Work Opportunity Tax Credit which is available to help companies hire long-term unemployment recipients and other groups of workers facing significant barriers to employment.

The Work Opportunity Tax Credit encourages employers to hire workers certified as members of any of the following targeted groups facing barriers to employment:
  • temporary Assistance for Needy Families (TANF) recipients
  • unemployed veterans, including disabled veterans
  • formerly incarcerated individuals
  • designated community residents living in Empowerment Zones or Rural Renewal Counties
  • vocational rehabilitation referrals
  • supplemental Nutrition Assistance Program (SNAP) recipients
  • supplemental Security Income (SSI) recipients
  • long-term family assistance recipients
  • long-term unemployment recipients

An employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit to their state workforce agency (SWA) to qualify for the credit within 28 days after the eligible worker commences work. However, under a special relief provision, a submission deadline on November 8, 2021, applies to qualified summer youth employees and designated community residents living in Empowerment Zones.

Eligible employees must commence work on or after January 1, 2021, and before October 9, 2021, to qualify for the submission deadline. The Work Opportunity Tax Credit is claimed on eligible businesses’ federal income tax returns and is usually based on wages paid to qualified workers during the first year of employment. The credit is first figured on Form 5884, Work Opportunity Credit, and then is claimed on Form 3800, General Business Credit.

Under a special rule, employers are permitted to claim the Work Opportunity Tax Credit for hiring qualified veterans, although the credit is not available to tax-exempt organizations for most groups of new hires. Such organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations.

Obviously, this is for hires you have made this year, but if any of your employees meet these qualifications, the credit can decrease the amount of tax that will be due on your next return. Reach out to us with questions or for help with this credit.

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