Notice 2016-22 was recently issued by the IRS to provide transition relief for employers to claim Work Opportunity Tax Credits (WOTC). The deadline to submit WOTC certification forms has been extended to June 29, 2016. The notice provides employers with the time needed to submit certification forms for qualified employees hired in 2015. This relief is offered in response to the passing of the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act was signed late last year and extended many WOTC provisions retroactively to January of 2015. In addition, the PATH Act expanded the targeted groups’ definition to include the qualified long-term unemployed.
The WOTC allows tax credits for portions of wages paid by employers who hire employees under certain circumstances. Taxable employers are eligible for the credit when they hire employees who belong to targeted groups. Tax-exempt organizations (501(c)) may receive the credit when they hire qualified veterans.
- In order to claim the credit, the employer must certify that the individual belongs to a targeted group. To certify an individual, the employer must:
Get certification from a designated local agency (DLA) that a prospective employee is a member of a targeted group on or before the day the individual begins work.
OR
Complete a Form 8850 Pre-screening Notice and Certification Request for the Work Opportunity Credit for the prospective employee on or before the day that individual is offered employment. Then, the employer must submit Form 8850 to the DLA no later than the 28th day after the individual begins work. - In addition, the employer must submit a Department of Labor Employment and Training Administration (ETA) Form 9061 Individual Characteristics or Form 9062 Conditional Certification to the DLA.
From now until June 29, 2016, employers can submit Form 8850 to DLAs for members of the following groups hired between January 1, 2015, and May 31, 2016:
- Qualified IV-A recipients
- Qualified veterans
- Qualified ex-felons
- Designated community residents
- Vocational rehabilitation referrals
- Qualified summer youth employees
- Qualified supplemental nutrition assistance program benefits recipients
- Qualified SSI recipients
- Long-term family assistance recipients
The June 29, 2016, deadline also applies to an employer that hires a qualified long-term unemployment recipient between January 1, 2016, and May 31, 2016. The term qualified long-term unemployment recipient means any individual who is certified by the DLA as:
- Being in a period of unemployment not less than 27 consecutive weeks.
- Being in a period of unemployment that includes a period of time in which the individual was receiving state or federal unemployment compensation.
This guidance and transition relief provides employers with an opportunity to review their 2015 and 2016 hiring history and retroactively obtain certifications for employees falling under the definition of targeted groups or qualified long-term unemployment recipients in order to claim the WOTC on their 2015 and 2016 tax returns.
For more information on the Work Opportunity Tax Credit, contact John Rittichier, CPA at 800-880-7800 ext. 8484 or 502-882-8484.
