The Protecting Americans From Tax Hikes Act of 2015 (PATH Act) provided a temporary extension of the work opportunity tax credit (WOTC). Originally scheduled to expire on Dec. 31, 2014, the PATH Act retroactively extended the WOTC from Jan. 1, 2015, through Dec. 31, 2019. As a result, the WOTC now is available for businesses that hired employees in 2015 in one of the following targeted groups:
- Qualified temporary assistance to needy families recipients, including certain long-term family assistance recipients
- Qualified veterans
- Qualified ex-felons
- Designated community residents
- Qualified summer youth employees
- Vocational rehabilitation referrals
- Qualified Supplemental Nutrition Assistance Program (SNAP) recipients
- Qualified Supplemental Security Income (SSI) recipients
The PATH Act also added a target group, qualified long-term unemployment recipients, for new hires on or after Jan. 1, 2016. A qualified long-term unemployment recipient is an individual who has been unemployed for more than 27 consecutive weeks and who, for some time during that period, received federal or state unemployment compensation.
In order to claim the WOTC for a new employee, an employer must do either one of the following:
- Obtain certification from a designated local agency (DLA) that the employee is a member of a targeted group on or before the day the individual begins work.
- Complete IRS Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” on or before the day the individual is offered employment and submit the form to the DLA to request certification no later than 28 days after the individual begins work.
IRS Notice 2016-22 gives employers that did not obtain certification from a DLA for qualified employees starting work between Jan. 1, 2015, and May 31, 2016, until June 29, 2016, to submit Form 8850 to a DLA. Employers that already have filed their tax returns will need to file amended tax returns to claim the WOTC for any newly certified employees.