Additional Extension: Work Opportunity Tax Credit

June 30, 2016

On June 17, 2016, the IRS issued Notice 2016-40, which extends the transition relief period for employers claiming the Work Opportunity Tax Credit (WOTC) for new qualifying employees until September 28, 2016. Specifically, the notice grants an extension of time to submit Form 8850, Pre-Screening Notice and Certification Request to the Designated Local Agency to certify targeted group members hired.

The WOTC is a wage credit available to employers that hire individuals who are members of a “targeted group,” including, among others, qualified veterans, recipients of assistance from a state TANF plan, qualified summer youth employees, qualified food stamp recipients, and long-term unemployment recipients. Depending on the employee’s target group, the maximum credit amounts range from $2,400 to $9,600 for each certified new hire.

Normally, to be eligible for the tax credit, the pre-screening notice must be submitted by an employer no later than 28 days after an individual begins working for them. In March, the 28-day deadline for WOTC pre-screening notices was extended to June 29, 2016. However, the IRS has further extended the deadline through the issuance of this most recent notice to September 28, 2016. The extension applies to qualifying employees hired from January 1, 2015, to August 31, 2016. However, for qualified long-term unemployment recipients, which is a newly created target group within the WOTC program, the extension applied to qualifying employees hired from January 1, 2016, to August 31, 2016.

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