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Minimizing business tax
Congress Extends the Certification Window for 2014 WOTC
Congress has extended the Work Opportunity Tax Credit (WOTC) expiration from January 1, 2014, to January 1, 2015. This is good news for employers who hired members of targeted groups in 2014, such as veterans, summer youth workers, and people from low-income households.
Congress also authorized a relief period that gives organizations of all sizes until April 30, 2015, to review 2014 hiring and retroactively submit certifications for qualified employees. Employers will need to act quickly to determine if employees are eligible, and then complete and file Form 8850 along with supporting documentation.
How WOTC works
Taxable employers can claim the WOTC as a general business credit against their income tax by filing Form 3800. The WOTC is calculated using Form 5884 for taxable organizations and Form 5884-C for exempt organizations.
- For flow-through organizations with partners in alternative minimum tax (AMT), WOTC will offset the AMT.
- If the WOTC is not fully utilized in the current year, the excess may be carried back to the immediate prior year. Any remaining excess may be carried forward for up to 20 years.
The tax credit allows employers to reduce their federal tax liability by up to $9,600 per eligible new hire.
- The tax credit applies to temporary, seasonal, part-time, and full-time workers who clocked in at least 120 hours last year. The tax credit is available for new hires with job start dates from January 1, 2014, through December 31, 2014.
- The WOTC applies only to new employees who have never worked for the hiring employer at any other time.
- Any type of job is acceptable
Tax-exempt 501(c)(3) entities only qualify for hiring from the veteran target groups. Nonprofits can make the claim using Form 5884-C as a credit against the employer’s share of Social Security tax. The credit will not affect the employer’s Social Security tax liability reported on the organization’s employment tax return. Rather, the amount of the credit will be refunded to the organization in the form of a check.
How we can help
The extension gives employers additional time to begin the certification process. But it also represents an opportunity to review internal hiring processes so that going forward, all available WOTC potential is captured. We can help you interpret the WOTC provisions (including identification, verification, certification, calculation, and reporting) and apply them to your hiring process to maximize capture of the benefit.