To encourage businesses to hire individuals from certain select groups, Congress Passed the Work Opportunity Tax Credit (WOTC) for employers. As they did for a lot of credits and other tax code opportunities, Congress did not renew the WOTC until late in 2015, but the extension applied retroactively back through the entire year.  In addition, they originally extended the deadline for applying for 2015 credits until June 29, 2016. In June they extended it further. Employers now have until September 28, 2016 to file the necessary forms to claim the credit for eligible workers who begin work for the employer on or before August 31, 2016.
“It’s all about hiring people,” TD&T’s Jill Brumbaugh, CPA explained. “If they hired people in certain categories, they can apply to Iowa Workforce Development, in the Iowa Division of Workforce Services.  They can take credit for 2015 hires in 2016.  It’s retroactively implemented.”
Normally, employers need to apply within 28 calendar days of the employee’s start date, but because this extension took until the end of the year to implement, the rules have been modified for all hires from January 1, 2015 through May 31, 2016.  After that, the normal 28-day requirement kicks back in. 
Who Can Qualify for This Credit?
According to the Iowa Workforce Development website, The WOTC is available to employers who hire individuals from eligible target groups including:
  • Veterans
  • Temporary Assistance to Needy Families recipients
  • Supplemental Nutrition Assistance Program recipients
  • Residents of Designated Rural Renewal Counties in Iowa which include Adair, Adams, Appanoose, Audubon, Butler, Calhoun, Cass, Cherokee, Clay, Clayton, Emmet, Floyd, Franklin, Fremont, Hancock, Humboldt, Ida, Keokuk, Kossuth, Montgomery, Osceola, Palo Alto, Pocahontas, Poweshiek, Sac, Taylor, Union, Wayne, Winnebago and Worth
  • Individuals referred from Vocational Rehabilitation
  • Ex-felons
  • Supplemental Security Income (SSI) recipients
WOTC reduces an employer’s cost of doing business by decreasing the employer’s federal income tax liability between $2,400 and $9,600 per employee, depending on the target group identified and hours worked during the first year of employment. For employers to earn a WOTC, the new employee must work at least 120 hours during the first year of employment and have not worked previously for the employer. Employers can claim the WOTC on an unlimited number of qualified employees each year.
“It really helps a lot of employers in our area, based on where the employees live and whether they are in one of the included categories. To claim the credit, the employer has to go through the Iowa state agency, Iowa Workforce Development.  The agency certifies eligibility,” Jill said.
How to Apply
The Iowa Workforce Development website gives full details on the application process.  Here are some highlights from that website:
  1. Complete and submit page 1 of IRS Form 8850 by the day the job offer is made.
  2. Complete and submit page 2 of IRS Form 8850 after the individual is hired. 
  3. Complete and submit ETA Form 9061 after the individual is hired.
Submit the completed and signed IRS and ETA forms to the appropriate state workforce agency within 28 calendar days of the new employee’s start date.
Iowa WOTC Applications
Iowa prefers you to submit your applications using the Online WOTC system and to email all supporting documentation to the WOTC coordinator.  Links appear on the website. If you prefer, you may also mail or fax applications and supporting documentation. 
The state workforce agency determines eligibility for target groups on submitted applications.  The agency provides determinations to the employer either electronically or by mail depending on how the application was submitted. The determination will indicate one of the following:
  • The employee is certified as meeting the eligibility for one of the WOTC target groups
  • The employee is denied because he or she did not meet the eligibility for a target group
  • The state workforce agency needs additional supporting documentation in order to make a determination
After the employee is certified, the business may file for the tax credit with the IRS.
For more information on how to file for the tax credit with the IRS, TD&T will be happy to help you understand the details regarding this credit and how to apply for it.
For detailed online information on this credit, you will find more at these links: