What’s Up With What’s Up With WOTC?WOTC?

Guest: Bret AndersonHosted by: Vaune Shelbourn

Legislative BackgroundLegislative Background

The Work Opportunity Tax Credit (WOTC) Program - created by the Small Business Job Protection Act of 1996.

A tax credit incentive created in 1996 to:Encourage private sector employers - to create jobs and training opportunities for disadvantaged individuals from 12 target groups with significant barriers to employment

The Consolidated WOTC The Consolidated WOTC Program…Program…

What is the WOTC Program? WOTC focuses on: basic entry-level skills training,

long-term employment, and retention.

Who Qualifies for the WOTC Program? Newly hired employers who must not have worked for the employer in the past.

Who Does Not Qualify for WOTC? Relatives, dependants of the employer

The majority owner of the business

The WOTC Program will be available for targeted job groups of job seekers who first start work on or before Aug. 31, 2011

Current Legislative Changes… Current Legislative Changes… American Recovery and Reinvestment Act (ARRA) of

2009 (Recovery Act) – signed into law (P. L. 111-5) on February 17, 2009. Section 1221 amends Section 51 of the IRC by adding a new target group:

Unemployed Veterans IRS Notice 2009-28 – provided for a Transition Rule Period. Currently, under IRS Notice 2009-69… Any employer who hired a member of the new group after December 31, 2008 & before September 1, 2011, will have meet the timely filing requirement, if the employer submitted IRS Form 8850 (& ETA 9061) to their State Workforce Agency (SWA) not later than October 17, 2009.

WOTC – Veterans Targeted WOTC – Veterans Targeted GroupsGroups

1. Qualified Veterans meet the Wagner-Peyser Act definition AND belong to a family that, for 3 of prior 15 months, received Food Stamps

2. Disabled Veterans have a compensable disability, AND:

Were discharged within the prior 12 months, - OR -

Were unemployed at least 6 of the prior 12 months.

What a Difference a Year What a Difference a Year Makes!Makes!

March 2008:

Unemployment Rate for Veterans – 4.2%

Number of Veterans Unemployed – 525,000

March 2009:

Unemployment Rate for Veterans – 8.6%

Number of Veterans Unemployed – 1,050,000

WOTC – Veterans Targeted WOTC – Veterans Targeted GroupsGroups

3. Unemployed Veteran All individuals who were certified by a State

Workforce Agency (SWA) as:

1)having been discharged or released from active duty at any time during the 5-year period ending on the hiring date; and

2)having received UI benefits for not less than 4 weeks during the 1-year period ending on the hiring date.

American Recovery & American Recovery & Reinvestment Act of 2009 Reinvestment Act of 2009

Who is considered a "veteran" for WOTC purposes?

Section 51 of the Internal Revenue Code defines a Veteran as an individual who:

1) Served on active duty for a period of more than 180 days, or

2) Was discharged or released from active duty for a service connected disability.

Documentation and/or collateral contacts required for the new target groups’ eligibility determination by the SWAs.

Unemployed Veterans. Criteria and documentation required from employers/consultants and new hires:

1) To determine that the individual satisfies the definition of a Veteran (i.e., having served on active duty for a period of more than 180 days, or having been discharged or released from active duty for a service-connected disability a veteran must produce:

• DD-214. and

• FL 21-802 (Issued ONLY by the Department of Veterans’ Affairs (VA)), which certifies a veteran’s service-connected disability, or

• Valid Military Discharge papers

American Recovery & American Recovery & Reinvestment Act of 2009 Reinvestment Act of 2009 (cont.) (cont.)

Documentation and/or collateral contacts required for the new target groups’ eligibility determination (Continued…)

Unemployed Veterans. Criteria and documentation required from employers/consultants and new hires:

2) To determine that the veteran was discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date a veteran must produce:

• DD-214, or

• Valid Military Discharge papers

American Recovery & American Recovery & Reinvestment Act of 2009 Reinvestment Act of 2009 (cont.) (cont.)

Documentation and/or collateral contacts required for the new target groups’ eligibility determination (Continued…).

Unemployed Veterans. Criteria and documentation required from employers/consultants and/or new hires:

3) To determine if a veteran has received Unemployment Insurance (UI) benefits for the required period a veteran must produce:

• Valid UI Claims Records

American Recovery & American Recovery & Reinvestment Act of 2009 Reinvestment Act of 2009 (cont.) (cont.)

Tax Credit Benefits…Tax Credit Benefits…

Claiming the WOTC – is subject to employers meeting the “Minimum Employment or Retention Period” as follows:

TIER 1: WOTC is equal to 25% of “qualified” first (1st) -year’s wages

if the “new hire” worked at least 120 hours.

TIER 2: WOTC is equal to 40%, “qualified” 1st -year. wages, if the “new hire” worked at least 400 hours or more.

How to Figure the WOTC? How to Figure the WOTC?

TARGET GRP.RETENTION PERIOD& Credit Percentage

MAXIMUMEMPLOYER

CREDIT

WAGES & CREDITCALCULATION

VETERAN25% if he or she worked between

120 and 399 hrs.$1,500 25% x $6,000

VETERAN40% if he or she worked between

400 hrs. or more$2,400* 40% x $6,000

VETERAN with aService-

ConnectedDisability

25% if the Veteran

worked between

120 and 399 hrs.

$3,000 25% x 12,000

VETERAN with aService-

ConnectedDisability

40% if the Veteran

worked

400 hrs. or more

$4,800** 40% x $12,000

How Do Employers How Do Employers Apply?Apply?

There are two forms employers must complete for each new hire:◦ IRS Form 8850: “Pre-Screening Notice and

Certification Request” Must be submitted with ORIGINAL signatures and

dates (no exceptions)

◦ Employment and Training Administration (ETA) Form 9061* – “Individual Characteristics Form”

* Note: An ETA Form 9062 can be sent if the new hire was pre-certified. However, these forms can ONLY be issued by a State Workforce Agency or a Participating Agency (PA).

What Does Timely Filing What Does Timely Filing Mean?Mean?To be considered timely, the IRS Form 8850, along with the ETA 9061 or ETA 9062, must be submitted to the employer’s SWA not later than the 28th calendar day* following the new employee’s ‘employment-start date.’

* Note: When the last day of the 28th 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 28th day).

For a copy of the Directory of WOTC State Coordinators with the address of your state to mail the certification request, visit the WOTC Program website at: http://www.doleta.gov/business/Incentives/opptax