Work Opportunity Tax Credit (WOTC)
WOTC brochure
WOTC is a federal tax credit that encourages employers to hire workers from nine target groups. The tax credit is designed to help job seekers gain on-the-job experience, move towards economic self-sufficiency, and help reduce employers federal tax liability.
WOTC Target Groups
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What’s New?
The Small Business and Work Opportunity Act of 2007 made the following changes.
- The Work Opportunity Tax Credit has been extended to cover individuals who begin work for you before September 1, 2011.
- For individuals who begin work for employers after May 25, 2007, the qualified veterans group is expanded to include veterans entitled to compensation for a service connected disability and during the one-year period ending on the hiring date were:
- Discharged or released from active duty in the U.S. Armed Forces or
- Unemployed for a period or periods totaling at least six months. The first-year wages taken into account for these disabled veterans is $12,000.
- For individuals who begin work for employers after May 25, 2007, the high-risk youth group have been renamed “Designated Community Residents” and expanded to include individuals who are at least age 18 but not yet age 40. In addition, residents of rural renewal counties have been added to this group.
- The Food Stamp target group age requirement has been expanded from 18 to 39
- The 21-day postmark requirement has been extended to 28 days
- The economic eligibility determination based on family income for the ex-felon target group has been removed and
- The merger of the Welfare to Work Tax Credit Program into the WOTC Program has created a new WOTC target group, “Long-Term Family Assistance Recipient.”
American Recovery and Reinvestment Act of 2009
On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009. The Recovery Act amended Section 51 of the Internal Revenue Code by adding two additional target groups to the WOTC Program. The amended Section 551 (d) (14) provides that “unemployed veterans” and “disconnected youth” who begin work for an employer during 2009 and 2010 shall be treated as members of a targeted group for purpose of WOTC.
How Much is the Tax Credit?
The tax credit for hiring Long-Term Family Assistance Recipients is 40% of the first $10,000 of wages in the first year and 50% of first $10,000 of wages in the second year. The Tax Credit for hiring other target groups (except summer youth employees) is up to $2,400 for each new hire; 40% of qualified first year wages for those employed 400 or more hours; 25% for those employed at least 120 hours (but less than 400). Qualified wages are capped at $6,000; summer youth wages are capped at $3,000.
Who are the Target Groups?
The employer must hire from among the following groups of job seekers to qualify for the Work Opportunity Tax Credit.
- Qualified TANF Recipient - This target group refers to recipients of TANF who have received benefits for any nine months during the 18-month period ending on the hiring date.
Transitional Employment Assistance - Assistance benefits go to an “assistance unit” in all IV- A programs. Federal regulations at 45 CFR Chapter II, 205.4 (b)(1) define assistance unit as “all individuals whose needs, income and resources are considered in determining eligibility for, and the amount of, an assistance payment for which Federal financial participation is claimed under Title IV of the Social Security Act.” - Qualified Veteran - This target group refers to any person certified by the Designated Local Agency as one who:
- Is a member of a family receiving assistance under the Food Stamp Program for at least a three-month period during the 15 months ending on the hiring date, and
- Has served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days, or was discharged or released from active duty in the Armed Forces of the United States for a service-connected disability, and
- Did not have a period of active duty (not including training) of more than 90 days
- For individuals who begin work for employers after May 25, 2007, the qualified veterans group is expanded to include veterans entitled to compensation for a service connected disability and during the one-year period ending on the hiring date were:
- Discharged or released from active duty in the U.S. Armed Forces, or
- Unemployed for a period or periods totaling at least six months.
- Qualified Ex-Felon -
This target group refers to any person certified by the Designated Local Agency as one who:
- Has been convicted of a felony under any statute of the United States or any state and
- Has a hiring date that is not more than one year after the last date on which he/she was convicted or the date released from prison.
Note: The definition of the Ex-Felon target group has been clarified in past legislation to treat an individual as convicted if a State court places the individual on probation without a finding of guilty (deferred adjudication). Ex-Felons who are participating in a transitional program, e.g., work release, are eligible for the WOTC program if they were convicted of a felony and are members of an economically disadvantaged family. Those incarcerated and not on work release are not eligible because they are considered not available for employment.
- Designated Community Resident - This target group refers to any person certified by the Designated Local Agency as one who:
- Is at least age 18 and not yet 40 on the hiring date, and
- Has his or her principal place of abode within an Enterprise Community or Rural Renewal County
Note: The employee must continue to reside in the zone throughout participation in the program. “Qualified wages” for a high-risk youth shall not include wages paid or incurred for services performed while living outside of the zone.
Note 2: New Mexico designated areas for Enterprise Community (EC) are located in Luna County (City of Deming) and the Shiprock Reservation in the Four Corners area of New Mexico. The Rural Communities are Quay County (Tucumcari) and Harding County (Town of Mosquero).
- Vocational Rehabilitation Referral - This target group refers to any person certified by the Designated Local Agency as:
- Having a physical or mental disability which, for that individual, constitutes or results in a substantial handicap to employment, and
- Was referred to the employer upon, or at any time after completing or while receiving, rehabilitative services pursuant to:
- an individualized written plan of employment under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973, or
- a vocational rehabilitation program for veterans, carried out under Chapter 31 of Title 38, U.S. Code. Referrals receiving services through vocational rehabilitation qualify for up to two years after receipt of last services.
Note: Ticket to Work refers to Social Security Disability Income (SSDI) or Supplemental Security Income (SSI) recipients who assigned their ticket to an employment network with the goal of regaining self-sufficiency through work. Ticket to Work should be written at the top of the Individual Characteristics Form (ETA 9061). Additional information is available at www.ssa.gov.
- Qualified Summer Youth - This target group refers to any person certified by the Designated Local Agency as one who:
- Performed services for the employer between May 1 and September 15;
- Has attained age 16 but not 18 on the hiring date, (or by May 1 of the calendar year involved);
- Has never worked for the employer before; and
- Has his/her principal place of abode within a Rural Renewal County.
- Qualified Food Stamp Recipient - This target group refers to any person certified by the Designated Local Agency as one who:
- Has attained the age of 18 but not yet age 40 on the hiring date, and
- Is a member of a family receiving assistance under a food stamp program under the Food Stamp Act of 1977 for the six-month period ending on the hiring date or is receiving such assistance for at least three months of the five-month period ending on the hiring date.
- SSI Recipient - This target group refers to any individual who is certified by the designated local agency as receiving supplemental security income benefits under Title XVI of the Social Security Act for any month ending within the 60-day period ending on the hiring date.
- Long-Term Family Assistance Recipient – An individual who is a member of a family that:
- Has received TANF payments for a least 18 consecutive months ending on the hiring date, or
- Received TANF payments for any 18 months (whether or not consecutive) beginning after August 5, 1997, ending within two years, or
- Stopped being eligible for TANF payments because Federal or state law limits the maximum period such assistance is payable and the individuals are hired not more than two years after such eligibility ended.
- Unemployed Veteran – an individual certified by the designated local agency as someone who:
- has served on active duty (other than for training) in the Armed Forces for more than 180 days or having been discharged or released from active duty for a service- connected disability:
- was discharged or released from active duty in the Armed Forces at any time during the five- year period ending on the hiring date: and
- has received unemployment compensation under State or Federal law for not less than four weeks during the one year period ending on the hiring date.
- DD214, or
- Fl 21-802 (Issued only DVA, certifies a Veteran with a service-connected disability), or
- Discharge papers
- Unemployment Insurance claims records
- Disconnected Youth - is defined as an individual certified by the designated local agency as someone
- at least age 16 but not yet age 25 on the hiring date:
- has not been regularly attending any secondary, technical, or post-secondary school during the six months period preceding the hiring date.
- Has not regularly been employed during the six-months period before the hiring date; and
- Was not readily employable due to lack of basic skills
- Self attestation that the individual does not have a high school diploma or GED, or
- Self attestation that the individual has a certificate of graduation from a secondary school or GED that was awarded no less than 6 months preceding the hiring date and has not held a job (other than occasionally) or been admitted to a technical school or post secondary school since receiving the certificate.
Note:
To determine that the individual satisfies the definition of veteran
(Having served on active duty for a period of more than 180 days or having been discharged or released from active duty for a service connected disability);
To determine if a veteran has been in receipt of unemployment compensation
GED certificate at least six months before the hiring date and who otherwise satisfies the requirements for a disconnected youth will not fail to qualify as disconnected youth merely because he has been employed at times since graduation, as long as that employment was no more than occasional.
NOTE:
To determine whether the youth was not readily employable due to lack of basic skills:
Who Should Complete and Sign the Form?
The job applicant gives information to the employers on or before the day a job offer is made. This information is entered on Form 8850. Based on the applicant’s information, the employer determines whether or not he or she believes the applicant is a member of a targeted group (as defined under Members of Targeted Groups). If the employer believes the applicant is a member of a targeted group, the employer completes the rest of the form no later than the day the job offer is made. Both the job applicant and the employer must sign Form 8850 no later than that date for submitting the form to the New Mexico Department of Workforce Solutions.
| Forms | |
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| IRS Form 8850 Instruction - Updated August 2009 | IRS Form 8850 - Updated August 2009 |
| ETA Form 9061 - Updated September 2009 | |
| ETA Form 9062 Conditonal Certificate - updated June 2007 | |
| WOTC brochure | |
| Disconnected Youth Self-Attestatation | |
| Verification Form | |
Information must be postmarked within 28 days of employee’s employment start date. The 8850 cannot be faxed; the original must be mailed.
Employers can only get a tax credit if they receive certification from the Department of Workforce Solutions.
Request for certification may be submitted to:
New Mexico Department of Workforce Solutions
Workforce Services Division
Work Opportunity Tax Credit (WOTC) Unit
P.O. Box 1928
Albuquerque, New Mexico 87103
Future updates will be seen on this home page.
For additional information call:
New Mexico Department of Workforce Solutions
State WOTC Coordinator
Tel: 505-841-8501 Fax: 505-841-8467
