Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a federally-funded program that reduces the federal tax liability of private-for-profit employers hiring new employees from selected target groups. Individuals in these target groups have consistently had difficulty obtaining employment. Employers hiring qualified applicants may obtain tax relief through the WOTC program. Credit amounts are based upon a percentage of wages paid to, and hours worked by, properly certified employees.

Program Dates: Congressional legislation governs the WOTC that is available to employers on a year-round basis.

Program Details

The WOTC is governed by Public Law 111-312; Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  The WOTC undergoes changes and extension(s) and modification to target groups as Congress sees fit.  Any target group may be discontinued, modified, or placed on hold for reauthorization. Employers and employer representatives may continue to submit applications for those target groups until a legislative decision is made and a Training Employment and Guidance Letter has been issued by the United States US Department of Labor Employment and Training Administration with instructions for State Workforce Agencies.

How To Apply

To apply for the Work Opportunity Tax Credit, an employer or employer representative must submit the IRS 8850 and ETA 9061 within 28 days (unless the US Department of Labor applies an period of transition relief) of the new hires’ start date to the state workforce agency, Department of Employment Services to the attention of the WOTC Coordinator.  The application should include documentation to support the verification of the identified target group, if applicable.

• DC WOTC Employer E-File Manual 
• DC WOTC Consultant E-File Manual

Eligible Target Groups

Employers hiring qualified applicants in the following target groups may apply for the federal tax relief under the WOTC program:

The Vow to Hire Heroes Act of 2011 (P.L. 112-56) expands and extends the Qualified Veterans groups. The five-year period of discharge is rescinded for this target group to include individuals hired on or after November 22, 2011, and before January 1, 2013.  A qualified veteran is a veteran who meets the following criteria:

• a member of a family that received SNAP benefits (food stamps) for at least a three-month period during the 15-month period ending on the hiring date,
• entitled to compensation for a service-connected disability and who is hired within one year of discharge or release from active duty in the US Armed Forces, or
• entitled to compensation for a service-connected disability and unemployed for a period or periods totaling at least six months of the year ending on the hiring date.

New Unemployed Categories:

• unemployed for at least 4 weeks, but less than 6 months,
• unemployed for at least 6 months

For additional information on the increased tax credits for hiring veterans, see the VOW to Hire Heroes Act Fact Sheet.

Other Target Groups

The legislative authority for the WOTC program's non-veteran groups expired on December 31, 2011 and is currently under Congressional advisement.  Given that the non-veteran groups may be reauthorized based on legislative history for WOTC, employers may still submit certification requests for these groups to states. States will accept and may process requests but not issue determinations until WOTC is reauthorized. If extended by Congress, for an employee to be certified as an eligible group member by a State Workforce Agency, the new hire must belong to one of the following target groups:

1. Long-term TANF Recipient. A member of a family that meet the following criteria:
   • Received Temporary Assistance to Needy Families (TANF) payments for at 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, and has a hiring date that is not more than two years after the end of the earliest 18-month period after August 5, 1997, or
   • Stopped being eligible for TANF payments during the past two years because a federal or state law limited the maximum time those payments could be made.
2. Short-term TANF Recipient. A member of a family that received TANF benefits for any nine-month period during the 18-month period ending on the hiring date.
3. Supplemental Nutrition Assistance Program (SNAP) Recipient. An 18-39 year old member of a family that received SNAP benefits for the six months ending on the hiring date or received SNAP benefits for at least three of the five  months ending on the hiring date.
4. Designated Community Resident. An 18-39 year old who lives within one of the federally-designated Rural Renewal Counties.

Note: HUD's urban and USDA's rural designated EZs expired on December 31, 2011. The Summer Youth group is no longer a target group.

5. Vocational Rehabilitation Referral. An individual with a disability who completed or is completing rehabilitative services from a state-certified agency, an Employment Network under the Ticket to Work Program, or the US Department of Veterans Affairs.
6. Ex-Felon. An individual who has been convicted of a felony and has a hiring date which is not more than one year after the last date on which he was so convicted or released from prison.
7. SSI Recipient. A recipient of Supplemental Security Income benefits for any month ending during the past 60-day period ending on the hire date.

Minimum Employment or Retention Period, In addition to belonging to one of the eight groups outlined above, all new adult employees must work a minimum of 120 hours for the employer to qualify to claim the WOTC.

Ineligible Populations, The following individuals or groups of individuals do not qualify for the WOTC, even if they meet the other eligibility criteria:

• Employer's relatives and dependents
• Majority owners of the employer
• Former employees

For more information, email us at does.wotc@dc.gov or call (202) 698-6001.