Mar 12th 2013
By Ken Berry
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More than two months after Congress authorized a retroactive extension of the Worker Opportunity Tax Credit (WOTC), the IRS has finally issued transitional rules for claiming the credit for recent job hires (IRS Notice 2013-14). Prior to enactment of the American Taxpayer Relief Act (ATRA), the WOTC technically expired on December 31, 2011.
The WOTC is available to employers who hire qualified workers from one of eight "targeted groups" or a special group of qualified veterans. The credit is generally equal to 40 percent of the worker's first-year wages up to $6,000, for a maximum credit of $2,400 per worker. For disabled veterans, the credit may be available for the first $24,000 of wages, for a maximum credit of $9,600 per worker. As with the regular WOTC, the credit for qualified veterans also expired, but not until December 31, 2012.
An employer must comply with strict documentation and certification requirements to be eligible to claim the credit for any of the targeted workers. There are four basic steps:
1. Complete page 1 of IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, by the day the job offer is made.
2. Complete page 2 of IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, after the individual is hired.
3. Complete US Department Labor Employment and Training Administration (ETA) Form 9061, Individual Characteristics Form (ICF) Work Opportunity Tax Creditor, or ETA Form 9062, Conditional Certification Work Opportunity Tax Credit, if the employee has been conditionally certified as belonging to a WOTC target group by a state workforce agency, vocational rehabilitation agency, or another participating agency.
4. Submit the completed and signed IRS and ETA forms to the appropriate state workforce agency. Forms must be submitted within twenty-eight calendar days of the employee's start date.
ATRA restores the WOTC, retroactive to January 1, 2012, and extends it through December 31, 2013. Similarly, the credit for qualified veterans is extended through December 31, 2013. The credit amounts remain the same as they were prior to ATRA.
Now the IRS has issued transitional rules for claiming job-hiring credits. Significantly, the IRS is giving employers additional time to file 8850s with the appropriate state agency for workers with past hiring dates, as follows:
- A taxable employer that hires a member of a targeted group on or after January 1, 2012, and on or before March 31, 2013, will be considered to have satisfied the requirement if the employer submits the completed 8850 to request certification by April 29, 2013.
- An employer that hires any qualified veteran on or after January 1, 2013, and on or before March 31, 2013, will be considered to have satisfied the requirement if the employer submits the completed Form 8850 to request certification by April 29, 2013.
Practically speaking, employers have until the end of the April to present the paperwork. Make sure that your clients don't miss this extended deadline.