The U.S. Bureau of Labor Statistics reports that unemployment is still very low, between 4.0% and 4.3% from May to November 2024. With hiring being difficult right now, business owners should know that they can get the Work Opportunity Tax Credit (WOTC) if they hire workers from certain groups who have trouble finding jobs. This tax credit can be up to $2,400 for each eligible employee, and even more for some veterans and “long-term family assistance recipients.” The credit is generally limited to eligible employees who start working for the employer before January 1, 2026.
To satisfy a requirement of the WOTC, a pre-screening notice must be completed by the job applicant and the employer on or before the day a job offer is made. This is done by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.
The Targeted Groups
An employer is eligible for the credit only for qualified wages paid to a member of a targeted group. These groups are:
- Qualified IV-A recipients who are members of families receiving assistance under the Temporary Assistance for Needy Families program
- Qualified veterans
- Qualified ex-felon
- Designated community residents
- Vocational rehabilitation referrals
- Qualified summer youth employees
- Qualified members of families in the Supplemental Nutritional Assistance Program
- Qualified Supplemental Security Income recipients
- Long-term family assistance recipients
- Qualified long-term unemployed individuals
Details To Qualify
To qualify for the credit, there are a number of requirements. For example, each employee must have completed at least 120 hours of service in their first year of service for the employer. Also, the credit isn’t available for certain employees who are related to or who previously worked for the employer.
There are different rules and credit amounts for certain employees. The maximum credit available for first-year wages is generally $2,400 for each employee, $4,000 for long-term family assistance recipients, and $4,800, $5,600, or $9,600 for certain veterans. In addition, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit over two years of $9,000.
For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum credit available for summer youth employees is $1,200 per employee.
A Win For You & Your Employees
In some cases, employers may elect not to claim the WOTC. In limited circumstances, the rules may prohibit the credit or require allocating it. However, the credit can be advantageous for most employers hiring from targeted groups — and it can result in jobs for those who need them. Contact us with questions or for more information about your situation.