The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) retroactively extended the Work Opportunity Tax Credit ("WOTC") for all targeted groups through December 31, 2019. The Act also expanded the list of targeted groups, effective January 1, 2016, to include qualified long-term unemployment recipients. In response, the IRS in March extended the deadline by which employers must file documentation to certify an employee's status as a member of a targeted group. Due to delays in the availability of the required forms, the IRS has provided an additional extension through September 28th.

The Work Opportunity Tax Credit is a federal program that provides tax savings to employers that hire individuals from certain target groups, including public assistance recipients, veterans, youth and those with previous felony convictions. The purpose of this program is to enable these individuals to gradually move from economic hardship to steady employment, while rewarding participating employers by lowering their federal income tax liabilities. 

The WOTC is generally 40 percent of up to $6,000 of a qualified worker's qualified first-year wages for a maximum credit of $2,400 per qualified employee. For qualified veterans, the maximum credit is 40 percent of qualified wages ranging from $6,000 to $24,000 depending on their classification (for a maximum credit ranging from $2,400 to $9,600).

Targeted groups historically included:

• Qualified individuals in families receiving certain government benefits, including Title IV-A Social Security benefits (aid for dependent children) or food stamps;
• Qualified individuals who receive supplemental Social Security income or long-term family assistance;
• Veterans who are members of families receiving food stamps, who have service-connected disabilities, or who are unemployed;
• Designated community residents;
• Vocational rehabilitation referrals certified to have physical or mental disabilities;
• qualified summer youth employees who live in empowerment zones, enterprise communities, or renewal communities; and
• Ex-felons hired no more than one year after the later of their conviction or release from prison.

Effective January 1, 2016, the list of targeted groups is expanded to include qualified long-term unemployment recipients. A qualified long-term unemployment recipient is any individual who is certified as being unemployed for not less than 27 consecutive weeks and that includes a period in which the individual was receiving federal or state unemployment compensation.

Typically, an employer must file 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, no later than 28 days after the employee in the targeted group begins employment. With the most recent extension, the employer now has until September 28, 2016, to file Form 8850 for any employees in targeted groups other than qualified long-term unemployment recipients hired between January 1, 2015 and August 31, 2016. Similarly, the employer has until September 28, 2016, to file Form 8850 for any qualified long-term unemployment recipients hired between January 1, 2016, and August 31, 2016.

In addition to filing Form 8850, employers must also file with their state WOTC coordinator, either:

• ETA Form 9062, Conditional Certification Form, if the job applicant received this form from a participating agency (for example, the Jobs Corps); or
• ETA Form 9061, Individual Characteristics Form, if the job applicant did not receive a conditional certification.

The timing of the release of these updated forms contributed to the additional extension granted by the IRS.

This retroactive extension of the deadline to submit Form 8850 and other required documentation provides yet opportunity to apply for the WOTC beyond the traditional 28-day window. If since the beginning of 2015, you hired employees who are members of any of the targeted groups above, contact your local CBIZ MHM tax professional to determine whether you can qualify for the Work Opportunity Tax Credit.

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