At the end of 2015, the U.S. House and Senate passed the Protecting Americans from Tax Hikes Act of 2015 (PATH). The PATH retroactively reauthorizes the Work Opportunity Tax Credit (WOTC) program for a five-year period, from Dec. 31, 2014 to Dec. 31, 2019.

WOTC is a federal tax credit available to employers for hiring individuals from certain target groups, who have consistently faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

Target groups for WOTC include:

• Unemployed veterans
• Temporary Assistance for Needy Families recipients
• Food stamp recipients
• Designated Community residents
• Vocational Rehabilitation-referred individuals
• Ex-felons
• Supplemental Security Income recipients
• Summer youth employees
• Qualified Long-Term Unemployment tecipients

For employers to qualify for the credit they must:

• File Form 8850 - Pre-Screening Notice and Certification Request for the Work Opportunity Credit - which is usually due no later than 28 days after an employee begins work.
• Taxable employers must claim the tax credit, after the required certification is secured, as a general business credit on Form 3800 against their income tax by filing:
  1. Form 5884
  2. Form 3800
  3. You business’s related income tax returns
• Tax-exempt employers must claim the credit against the employer social security tax by separately filing Form 5884-C after the required certification (Form 8850) is secured and after filing the related employment tax return for the period that the credit is claimed.

The credit is limited to the amount of the business income tax liability or social security tax owed. A taxable business may apply the credit against its business income tax liability, and the normal carry-back and carry-forward rules apply. For qualified tax-exempt organizations, the credit is limited to the amount of employer social security tax owed on wages paid to all employees for the period the credit is claimed.

If you are uncertain if you are an employer who qualifies for WOTC, feel free to contact one of our tax professionals at Earney & Company, L.L.P. at (910) 256-9995.