WORK OPPORTUNITY TAX CREDIT (WOTC) AND
WELFARE-TO-WORK
Frequently Asked Questions
Q.
What is the Work Opportunity and Welfare-to-Work Tax Credit (WOTC)?
A.
The WOTC, which includes the Welfare-to-Work Tax Credit, has two purposes:
·
To help individuals who qualify as a member of a target group to get a
job, and
·
To help employers who hire qualified individuals by giving them a credit
on their federal taxes.
Q.
What are the target groups?
A.
There are nine WOTC target groups:
·
A. Qualified recipients of Aid to Families with Dependent Children
(AFDC)
·
B. Qualified veterans who are receiving Food Stamps.
·
C. Qualified economically disadvantaged ex-felons hired no later than
one year after conviction or release from prison.
·
D. High risk youth ages 18 through 24 who reside in a federally
designated Empowerment Zone or Enterprise Community.
·
E. Vocational Rehabilitation referrals.
·
F. Qualified summer youth ages 16 through 17 who reside in a federally
designated Empowerment Zone or Enterprise Community.
·
G. Qualified Food Stamp recipients ages 18 through 24.
·
H. Qualified recipients of Supplemental Security Income (SSI).
·
I. Long-term recipients of AFDC.
Q. What if the employee does not receive AFDC benefits, food stamps, or TANF
payments?
A: The employee may qualify if they are a member of a family that received
benefits. In some cases, the employee does not have to be the primary recipient
of benefits.
Q.
What is the amount of the credit available through WOTC?
A.
The amount of the tax credit varies by target group. The tax credit for target
groups A,B,C,D,E,G, and H is 40 percent of qualified first year wages up to
$6,000 if the individual is retained for at least 400 hours. If the individual is
retained less than 400 hours but at least 120 hours a 25 percent tax credit is
available on qualified first year wages up to $6,000.
The tax credit for target group I, long-term recipients of AFDC is 35 percent of
first year qualified wages up to $10,000 and 50 percent of second year qualified
wages up to $10,000. The individual must be retained at least 180 days or 400
hours.
Q.
For which tax years can the credit be applied?
A.
Employers may claim the Work Opportunity Tax Credit or the Welfare-to-
Work Tax Credit for a total of two years. Employers who do not take the full
credit amount because of the tax liability limitation may carry back one year or
forward 20 years.
Q.
How long must the individual remain on the job to provide the employer with a
tax credit?
A.
Target groups A through H have a two-tier retention period; 400 hours for a 40
percent tax credit, at least 120 hours but less than 400 hours for a 25 percent tax
credit.
Target group I (long-term AFDC) must be retained 180 days or 400 hours.
Q.
What is the process for applying for WOTC?
A.
Three pieces of information must be submitted:
·
The applicant must complete and sign the WOTC Questionnaire
·
The applicant must complete and sign the 8850 form
·
The employer must complete the hiring information sheet
Mail to:
MJA & Associates
PO Box 3024
Corona, CA 92878
Q.
Can the forms be sent by fax or electronically via the Internet?
A.
No, only original signatures are accepted by the WOTC Centers.
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