We have exciting news to share with employers who count on the Work Opportunity Tax Credit (WOTC) to lower their tax liability.
The IRS has released IRS Notice 2015-13, which provides transition relief in consideration to the late retroactive renewal of the WOTC program in December 2014. The Notice waives the 28-day deadline for submitting IRS Form 8850 for qualifying employees that were hired in 2014. The new deadline for submitting applications is April 30, 2015. This gives employers the extra time that is needed to file the appropriate paperwork and receive the tax benefits of hiring an employee from a targeted group.
What does this mean for your business?
First, if you were on the fence in 2014, you may now submit the WOTC applications for employees that were hired in 2014 from targeted groups, such as unemployed veterans, ex-felons and food stamp recipients. Also, if you were actively screening and submitting WOTC applications in 2014 but were not able to submit one or more of them because you missed the 28-day deadline, you may now reconsider and file any late applications. All new paperwork for those hired in 2014 must be submitted by April 30, 2015.
Why did this Notice come about in the first place?
As you may remember, President Obama signed into law HR 5771, the Tax Increase Prevention Act of 2014. At the time, employers were pleased to see that their efforts to use the WOTC and other tax incentives were not wasted, but they also needed to act exceptionally fast and face a new expiration date that was approaching in just a couple of weeks, at the end of December.
Only employers that hire individuals from targeted groups are affected by the WOTC, but these employers depend on tax credits to lower their tax liability. Disappointment was shared in the short turnaround time, but employers were at least happy to see that the WOTC was extended through the end of December. Today, we can feel at ease as employers are now granted an extension for submitting late WOTC applications.
More information regarding Notice 2015-13 can be found on the IRS website. Before you are able to claim the WOTC, you must first obtain certification that the individual you hired is a targeted group member. This certification is obtained from the DLA, a state employment security agency. You must then submit Form 8850 to the DLA no later than 28 days after the individual begins work. Learn more about the WOTC at the United States Department of Labor website.