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WORK OPPORTUNITY TAX CREDIT (WOTC) AND

WELFARE-TO-WORK

Frequently Asked Questions

What is the Work Opportunity and Welfare-to-Work Tax Credit (WOTC)?

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.

What are the target groups?

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.

What is the amount of the credit available through WOTC?

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.

For which tax years can the credit be applied?

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.

How long must the individual remain on the job to provide the employer with a

tax credit?

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.

What is the process for applying for WOTC?

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

Can the forms be sent by fax or electronically via the Internet?

No, only original signatures are accepted by the WOTC Centers.