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The IRS has given employers extra time to submit Form 8850, which is required for businesses to take advantage of the Work Opportunity Tax Credit.

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Employers Have Until September 28 to File Work Opportunity Tax Credit Paperwork

  • 1/27/2016

Article updated: 6/17/2016

The IRS is giving employers more time to file paperwork for the Work Opportunity Tax Credit (WOTC). The extension was announced in Notice 2016-40. The new deadlines are as follows:

WOTC Target Group Hire Date Filing Deadline
Individuals in any of the original nine categories January 1, 2015 – August 31, 2016 September 28, 2016
Individuals in the nine categories and a newly added category: long-term unemployed (added January 1, 2016) January 1, 2016 – August 31, 2016 September 28, 2016

Previously, employers had only 28 days from the hiring date to submit the forms for eligible employees. Employers can now disregard that 28-day requirement for a short period of time to submit Form 8850 and Form 9061.

The extension allows employers to look back to their hires from 2015 and examine those that started in 2016 under the newly expanded pool of eligible candidates. That pool now includes long-term unemployment recipients. To be eligible in this category, candidates must have a minimum of 27 consecutive weeks of unemployment and must have received unemployment benefits during a portion of the period. Like many of the other new hire categories, the tax credit for this new category is up to 40 percent of the first $6,000 of wages.

The credit extension came out of the Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114-113, div.Q (the PATH Act).

Qualifying WOTC employees 

The WOTC offers taxpayers a federal income tax credit worth as much as 40 percent of qualified first year wages for hiring qualified employees. Qualified employees are certified by State Workforce Agencies as members of targeted groups as defined under IRC Sec. 51(d)(1-9) including qualified: 

  • Veterans
  • Ex-felons
  • Designated community residents
  • Vocational rehabilitation referrals
  • Summer youth employees
  • Supplemental Nutrition Assistance Program Benefits recipients (SNAP)
  • Supplemental security insurance recipients
  • Long-term family assistance recipients

Effective January 1, 2016, the following target group was added:

  • Long-term unemployment recipients

How we can help

Because the credit has been extended through 2019, employers now have several years of stability not previously experienced with the law. This presents an opportunity for employers to reevaluate their ability to claim the credit going forward, and look back to 2015. We can help you embed WOTC screening into the employment onboarding process and assist you in determining whether the credit applies to your organizational situation. We can also help you evaluate new hires since January 1, 2015 to capture any benefit related to qualified employment. We will assist with screening, data management, filing forms, reporting, and preparation of tax forms related to claiming the WOTC credit.