The IRS has finally issued guidance on how to deal with the retroactive extension of the Work Opportunity Tax Credit (WOTC) for 2015. In short, it’s an opportunity you don’t want to pass up.
How The WOTC Works For Business Owners
To claim this valuable tax credit, employers have 28 days from the date an employee was hired to certify that they fall into one of the qualifying categories. To do this, the new employee is typically asked to complete Form 8850 by the employer. The form is then filed with the IRS, while another form is filed with the Ohio Department of Jobs and Family Services. Once the new employee’s qualification is confirmed, the business may claim a credit against the income tax of a percentage of first-year wages.
Even though the credit was left to expire in 2015, some businesses continued to collect qualifying information from new hires – just in case. This turned out to be a good strategy because late last year, Congress finally voted to pass the PATH Act of 2015, which, among other things, extended the WOTC through 2019.
While some business owners may have phased out the practice of passing out Form 8850 to new employees, those who continued to qualify their new hires now have a chance to retroactively claim the WOTC credit. Employers have until June 29, 2016, to complete and file paperwork for qualifying employees to successfully claim the tax credit.
Tax Credit Available When You Hire Unemployment Recipient
The retroactive WOTC extension is not the only thing business owners should be aware of. In 2016 and until 2019, hiring long-term unemployment recipients (or an individual who has been unemployed for at least 27 consecutive weeks and who has, at some point, received unemployment benefits) will also qualify your business for the tax credit. To qualify for the WOTC under this new category, your employee(s) must have been hired between Jan. 1 and May 31, 2016.
Don’t miss out on your chance to claim the WOTC. Email Rea & Associates to learn more.
By Christopher Axene, CPA (Dublin office)
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