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Office of Disability Employment Policy

ODEP - Office of Disability Employment Policy

Disability Employment Policy Resources by Topic

Work Opportunity Tax Credit Program

What is it? The Work Opportunity Tax Credit (WOTC), which replaces the Targeted Jobs Tax Credit (TJTC) Program, provides a tax credit for employers who hire certain targeted low-income groups, including vocational rehabilitation referrals, former AFDC recipients, veterans, ex-felons, food stamp recipients, summer youth employees, and SSI recipients.

How does it apply to persons with disabilities? Applicants who are Vocational Rehabilitation (VR) referrals are eligible.

A VR referral is certified by the State Employment Security Agency (SESA) as:

  • Having a physical or mental disability resulting in a hindrance to employment; and
  • Referred to an employer upon completion of or while receiving rehabilitative services, pursuant to the Vocational Rehabilitation Act of 1973, as amended.

What is the amount? A tax credit of up to 40 percent of the first $6,000, or up to $2,400, in wages paid during the first 12 months for each new hire.

What are the effective dates? This program is subject to yearly Congressional renewal. The tax credit is extended to December 31, 2005. The credit is also retroactive to December 31, 2003.

What are the Minimum Employment Requirements? Eligible employees must work 180 days or 400 hours; summer youth must work 20 days or 120 hours. A partial credit of 25 percent for certified employees who worked at least 120 hours, but less than 400 hours, may be claimed by the employer.

What agency provides the WOTC certification?-The local State Employment Security Agency (SESA).

How do I file for this credit? Complete and submit IRS Form 8850, "Pre-Screening Notices and Certification Request for the Work Opportunity and Welfare-to-Work Credits," to your local SESA.

How does it work?

  • The employer determines likely eligibility by including the WOTC Pre-Screening Notice as part of the application process.
  • On or before the day employment is offered, the Pre-Screening Notice must be signed by the employer and employee and mailed to the SESA within 21 days after the employee begins work.
  • The employer documents eligibility (based on information received from the employee) and submits documentation to the SESA.
  • SESA certifies which individuals are eligible for WOTC, and notifies the employer in writing for purposes of filing the tax credit.

Where do I obtain IRS Form 8850?
Call 1-800-829-3676 (Voice) 1-800-829-4059 (TTY)
http://www.irs.gov/pub/irs-pdf/f8850.pdf

Where do I obtain additional information? Call your State Employment Agency WOTC Coordinator or (202) 219-9092. http://www.uses.doleta.gov/wotcdata.asp