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What’s Up With WOTC ?. Guest: Bret Anderson Hosted by: Vaune Shelbourn. Legislative Background. The Work Opportunity Tax Credit (WOTC) Program - created by the Small Business Job Protection Act of 1996. A tax credit incentive created in 1996 to:

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What’s Up With WOTC?

Guest: Bret Anderson

Hosted by: Vaune Shelbourn


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Legislative Background

The Work Opportunity Tax Credit (WOTC) Program - created by the Small Business Job Protection Act of 1996.

  • A tax credit incentive created in 1996 to:

  • Encourage private sector employers - to create jobs and training opportunities for disadvantaged individuals from 12 target groupswith significant barriers to employment


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The Consolidated WOTC Program…

  • What is the WOTC Program?

  •  WOTC focuses on: basic entry-level skills training,

    • long-term employment, and retention.

Who Qualifies for the WOTC Program?

 Newly hired employers who must not have worked for the employer in the past.

Who Does Not Qualify for WOTC?

 Relatives, dependants of the employer

 The majority owner of the business

The WOTC Program will be available for targeted job groups of job seekers who first start work on or before Aug. 31, 2011


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Current Legislative Changes…

  • American Recovery and Reinvestment Act (ARRA) of 2009 (Recovery Act) – signed into law (P. L. 111-5) on February 17, 2009.Section 1221 amends Section51 of the IRC by adding a new target group:

    • Unemployed Veterans

    • IRS Notice 2009-28 – provided for a Transition Rule Period. Currently, under IRS Notice 2009-69…

    • Any employer who hired a member of the new group after December 31, 2008 & before September 1, 2011, will have meet the timely filing requirement, if the employer submitted IRS Form 8850 (& ETA 9061) to their State Workforce Agency (SWA) not later than October 17, 2009.


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WOTC – Veterans Targeted Groups

1. Qualified Veterans meet the Wagner-Peyser Act definition AND belong to a family that, for 3 of prior 15 months, received Food Stamps

2. Disabled Veterans have a compensable disability, AND:

Were discharged within the prior 12 months,

- OR -

Were unemployed at least 6 of the prior 12 months.


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What a Difference a Year Makes!

March 2008:

  • Unemployment Rate for Veterans – 4.2%

  • Number of Veterans Unemployed – 525,000

March 2009:

  • Unemployment Rate for Veterans – 8.6%

  • Number of Veterans Unemployed – 1,050,000


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WOTC – Veterans Targeted Groups

  • 3. Unemployed Veteran

    • All individuals who were certified by a State Workforce Agency (SWA) as:

      • having been discharged or released from active duty at any time during the 5-year period ending on the hiring date; and

      • having received UI benefits for not less than 4 weeks during the 1-year period ending on the hiring date.


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American Recovery &

Reinvestment Act of 2009

  • Who is considered a "veteran" for WOTC purposes?

    • Section 51 of the Internal Revenue Code defines a Veteran as an individual who:

      • Served on active duty for a period of more than 180 days, or

      • Was discharged or released from active duty for a service connected disability.


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American Recovery &

Reinvestment Act of 2009 (cont.)

  • Documentation and/or collateral contacts required for the new target groups’ eligibility determination by the SWAs.

    • Unemployed Veterans. Criteria and documentation required from employers/consultants and new hires:

      • To determine that the individual satisfies the definition of a Veteran (i.e., having served on active duty for a period of more than 180 days, or having been discharged or released from active duty for a service-connected disability a veteran must produce:

        • DD-214. and

        • FL 21-802 (Issued ONLY by the Department of Veterans’ Affairs (VA)), which certifies a veteran’s service-connected disability, or

        • Valid Military Discharge papers


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American Recovery &

Reinvestment Act of 2009 (cont.)

  • Documentation and/or collateral contacts required for the new target groups’ eligibility determination (Continued…)

    • Unemployed Veterans. Criteria and documentation required from employers/consultants and new hires:

      • To determine that the veteran was discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date a veteran must produce:

        • DD-214, or

        • Valid Military Discharge papers


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American Recovery &

Reinvestment Act of 2009 (cont.)

  • Documentation and/or collateral contacts required for the new target groups’ eligibility determination (Continued…).

    • Unemployed Veterans. Criteria and documentation required from employers/consultants and/or new hires:

      • To determine if a veteran has received Unemployment Insurance (UI) benefits for the required period a veteran must produce:

        • Valid UI Claims Records


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Tax Credit Benefits…

  • Claiming the WOTC – is subject to employers meeting

  • the“Minimum Employment or Retention Period” as

  • follows:

  • TIER 1:

    WOTC is equal to 25% of “qualified” first (1st) -year’s wages

    if the “new hire” worked at least 120 hours.

  • TIER 2:

    • WOTC is equal to 40%, “qualified” 1st -year. wages, if the

    • “new hire” worked at least 400 hours or more.



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How Do Employers Apply?

There are two forms employers must complete for each new hire:

  • IRS Form 8850: “Pre-Screening Notice and Certification Request”

    Must be submitted with ORIGINAL signatures and dates(no exceptions)

  • Employment and Training Administration (ETA) Form 9061* – “Individual Characteristics Form”

*Note: An ETA Form 9062 can be sent if the new hire was pre-certified. However, these forms can ONLY be issued by a State Workforce Agency or a Participating Agency (PA).


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What Does Timely Filing Mean?

To be considered timely, the IRS Form 8850, along with the ETA 9061 or ETA 9062, must be submitted to the employer’s SWA not later than the 28thcalendar day* following the new employee’s ‘employment-start date.’

* Note: When the last day of the 28thcalendar day period ends on a Saturday, Sunday or holiday, the next succeeding business day will be treatedas the last day of the period (the 28th day).

For a copy of the Directory of WOTC State Coordinators with the address of your state to mail the certification request, visit the WOTC Program website at: http://www.doleta.gov/business/Incentives/opptax