Understanding the Work Opportunity Tax Credit
Presentation: 24.09.25 Understanding the Work Opportunity Tax Credit.pdf
Responses to pending questions:
- Can the person you hire be a contract worker?
No, employers may not receive WOTC for contract workers, the credit only applies to employees. Independent contractors are not considered employees are you are not withholding taxes for them.
- Can a business owner, who is also an employee of the business, claim WOTC for themselves if they fall within a targeted group?
Business owners are not eligible to claim WOTC Tax Credit for hiring yourself. Per IRC 51(i)(1)(A): (1) Related individuals -No wages shall be taken into account under subsection (a) with respect to an individual who — (A) bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity (determined with the application of section 267(c)),
- Can you claim the WOTC for an employee you re-hire?
The WOTC cannot be considered for any employee that was previously employed by the employer.
- Is there any consideration for military spouses in accordance with Executive Order 13832?
The guidance for WOTC clearly defines the eligible recipient as being a veteran who meets certain conditions. There is no consideration given for military spouses. There are other tax benefits provided for military families. Visit Military Family Tax Benefits to learn more.
IMPORTANT: During the presentation, it was mentioned that the Form 8850 needed to be sent to your State Workforce Agency (SWA). Your SWA may require you to send additional forms and documentation. Please refer to the website for your respective SWA to determine which forms need to submit and how to submit them. You can find contact information for your SWA at State Workforce Agencies.
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Join us as Anika Pompey, IRS Senior Stakeholder Liaison, explores the Work Opportunity Tax Credit (WOTC), a federal tax credit designed to incentivize employers to hire individuals from targeted groups facing significant employment barriers. Participants will understand WOTC comprehensively, including its eligibility criteria, pre-screening and certification requirements, credit limitations, and the process of claiming the credit on tax returns. This workshop allows small business employers to explore how WOTC can benefit their businesses while contributing to a more inclusive and equitable workforce.
Wednesday, September 25, 2024,
11 AM ET - 12 PM ET