Work Opportunity Tax Credit | Leaf Tax Consultants

The Work Opportunity Tax Credit incentives businesses to hire a diverse workforce. This tax credit is given to companies that hire people from one of ten targeted groups. Companies can claim the WOTC for employees hired on or before December 31, 2025. The WOTC is a collaboration with the Internal Revenue Service and the Department of Labor.

The Work Opportunity Tax Credit is contingent on companies’ proactive hiring process. The tax credit requires that an employee fill out specific information on or before their date of hire for a business to qualify. The employer must submit that information to a local workforce agency within 28 days, although some states may requires more advanced notice to qualify.

What is the Work Opportunity Tax Credit?

The Work Opportunity Tax Credit is an incentive from the IRS and the Department of Labor to encourage businesses to hire employees from specific targeted groups. If a business is hiring people from one of the ten specified groups, then they may be eligible for the credit, as long as they meet other criteria. One of the most important factors in the WOTC is the requirement that employers have each hire fill out Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit). This must be done on or before the employee’s date of hire.

What Targeted Groups Apply for the WOTC?

To qualify for the WOTC, each employee must meet the following:

be in their first year of employment;
certified as a member of a targeted group; and
work at least 400 hours for that employer.

The following groups may qualify for the WOTC:

IV-A recipient
Veteran
Ex-felon
Designated community resident
Vocational rehabilitation referral
Summer youth employee
SNAP benefits recipient
Supplemental security income (SSI) recipient
Long-term family assistant recipient
Long-term unemployment recipient

Does my company qualify for the WOTC?

Any company that hires from the groups specified may qualify for the tax credit.

However, companies must have a system in place to track and register applicants and submit qualified employees for the WOTC.

If a business does not have employees fill out the proper forms before hiring, the employer cannot retroactively receive the tax credit.

The Employee Retention Credit is great for companies across all industries, including: