Work Opportunity Tax Credit

The work opportunity tax credit is available to employers hiring individuals from one or more of nine targeted groups. Generally, the credit limit is $2,400 per employee, based on 40% of the first $6,000 of qualified wages paid for services rendered by a member of a targeted group during the 1-year period beginning on the day the individual begins work for the employer. The employer’s deduction for wages is reduced by the credit. The 2007 Small Business and Work Opportunity Tax Act extended and changed the work opportunity credit for an additional 44 months, to cover qualified individuals who begin work for an employer before September 1, 2011. A designated community residents targeted group replaces the high-risk youth category, and the age limit is increased to include otherwise qualifying individuals who are at least age 18 but not yet age 40 on the hiring date. In addition, rural renewal counties are eligible communities for this group.

A rural renewal county is a county in a rural area that lost population during the 5-year periods 1990 through 1994 and 1995 through 1999. Rural renewal counties are located in 32 states. They include Ohio counties of: Crawford, Monroe, Paulding, Seneca, and Van Wert.

To be eligible for the credit, the employer is required to have the employee complete and sign IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and federal Department of Labor (DOL) Employment and Training Administration (ETA) Form 9061, Individual Characteristics Form. The employer then is required to complete his part of the forms and submit both forms to the state Department of Workforce Development no later than August 2, 2007. (A certification letter is returned by the state agency, and it should be maintained in the employer’s files along with copies of the completed Forms 8850 and ETA- 9061, as substantiation of eligibility for the credit.) To claim the credit, Form 5884, Work Opportunity Credit, is filed with the employer’s income tax return. The employer’s deduction for the employee’s wages is reduced by the amount of the credit, even if some of the credit must be carried over to another tax year. More information may be obtained at: www.IRS.GOV .

This information is available in the National Income Tax Workbook 2007, Land Grant University Tax Education Foundation, Inc. The workbook is available by attending one of the OSU Income Tax Schools, sponsored by OSU Extension and the AEDE Department at OSU. Tax practitioners wanting to attend a school should contact the following web address: http://aede.osu.edu/Programs/TaxSchool/.

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