A Guide to WOTC and the Current Hiatus

The Work Opportunity Tax Credit (WOTC) presents a valuable opportunity for employers to receive tax credits for investing in individuals from specific groups, such as the long-term unemployed, SNAP recipients, or designated community residents.

The WOTC program plays a pivotal role in promoting a stable workforce and offering financial relief to employers during challenging economic times. Explore these potential tax savings and learn how they may benefit your organization.

Understanding WOTC

WOTC is a point-of-hire federal tax credit available to organizations employing individuals from specific groups. Taxable employers claim WOTC as a general business credit, with the ability to carry back the unused credits for one year and forward for 20 years, and it can offset the alternative minimum tax.

Tax-exempt organizations can also take advantage of WOTC for hiring qualified veterans, receiving a refund of Social Security taxes reported on their Form 941.

Employers interested in these benefits should properly understand the qualification criteria, maintain appropriate documentation, and integrate the credit processes into their hiring and financial practices.

Benefits of integrating WOTC

WOTC offers a significant benefit to employers. As a federal hiring credit, it’s available to all for-profit businesses and tax-exempt organizations (for veteran groups).

The credit amount can be substantial — reaching up to $9,600 per eligible new hire — contingent on the specific group the employee belongs to and the hours they work during their first year of employment.

A critical step in capturing the WOTC is integrating WOTC screening into the employer’s onboarding process. This strategic incorporation helps identify eligible hires who meet necessary conditions. A professional service provider can streamline WOTC compliance and help you navigate the complex paperwork and credit deadlines.

WOTC target groups include veterans, SNAP (food stamp) recipients, residents of Empowerment Zones or Rural Renewal Counties, ex-felons, unemployment benefit recipients, and individuals receiving Supplemental Security Income, among others.

For-profit businesses can use the credit to reduce their business income tax liability, while tax-exempt organizations — specifically when hiring qualified veterans — can apply it against payroll taxes. This flexibility allows a wide range of employers to benefit from WOTC, making it an appealing program for various organizations seeking to enhance their workforce while also receiving a tax benefit.

Claiming WOTC is time-sensitive and requires adherence to specific guidelines. Submitting Forms 8850 and 9061 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit and Individual Characteristics Form) to the respective State Workforce Agency within 28 days of the eligible worker’s start date is a pivotal compliance requirement. Employers must be diligent in this process to avoid forfeiting the credit.

Current WOTC hiatus: What it means

Even though federal authorization has lapsed, state workforce agencies (SWAs) continue operating under federal guidance:

• 2025 new hire start dates — Applications will continue to be processed
• 2026 new hire start dates — Applications may be submitted and logged but will not receive determinations until reauthorization

One SWA emphasized: “A WOTC program hiatus typically lasts three-to-four months. Employers should continue to submit timely applications throughout the hiatus. A filing extension after a hiatus is not always offered by the IRS. If a filing extension is not offered by the IRS, applications not timely filed will be denied as required by program law.”

Why WOTC reauthorization is expected

WOTC has been renewed 13 times, often retroactively, and has never failed to be reinstated after a lapse. Some hiatus periods have lasted almost a year, yet eligible hires were ultimately covered.

Congress is also considering bipartisan legislation to extend the credit indefinitely and expand eligibility.

What employers should do now

• Continue screening all new hires for eligibility
• Submit all applications on time
• Maintain documentation for retroactive claiming

How CLA can help with WOTC integration

By incorporating WOTC into their onboarding practices, employers may reduce their tax liability. Even during the current federal hiatus, employers should continue screening new hires and submitting forms on time. State workforce agencies are still accepting filings, and staying current now helps protect your ability to claim WOTC credits if Congress renews the program.

CLA’s tax professionals can help you build a clear, dependable approach to employment-related tax incentives by:

• Setting up screening steps that fit naturally into your onboarding process
• Preparing required forms and tracking filing deadlines
• Reviewing hiring activity to identify roles that may qualify under federal, state, or local programs
• Coordinating with payroll teams to apply credits correctly
• Monitoring program updates so your organization stays current on changing requirements

Contact us

WOTC helps you invest in the long-term success of your employees. Complete the form below to connect with CLA.