United States

Federal: Work Opportunity Tax Credit Extended; IRS Issues Guidance on Certification

Mar 02, 2015
From KPMG TaxWatch

Transcript Only

Loading the player...

On February 19, 2015, the Internal Revenue Service released Notice 2015-13, which provides guidance on the retroactive renewal of the Work Opportunity Tax Credit (WOTC). The WOTC had expired after December 31, 2013, but was renewed retroactively through section 119 of the Tax Increase Prevention Act of 2014 (TIPA). This legislation, signed by the President on December 19, 2014, allows WOTCs for employees hired from January 1, 2014 through December 31, 2014.

The WOTC is available to employers that hire individuals from certain targeted groups, such as qualified veterans, ex-felons, and food stamp recipients. Generally, employers are able to take a credit of up to 40 percent of the first $6,000 of qualifying first year wages per employee (i.e., $2,400), with restrictions to the extent that the employee works fewer than 400 hours.

One of the requirements for obtaining the WOTC under section 51 of the Internal Revenue Code is that the employer obtain certification from a designated local agency (e.g., a state employment agency) that the new hire is a member of the targeted group and therefore WOTC-eligible. Typically, an employer must submit federal Form 8850, Pre-Screening Notice and Certification Request, with the designated local agency within 28 days after the individual begins work. Because the WOTC was extended retroactively, the 28-day deadline had already passed for most employees hired during the relevant time period. IRS Notice 2015-13 extends the 28-day deadline for submission of Form 8850 until April 30, 2015 for certification of individuals hired from January 1, 2014 through December 31, 2014. Note that submission of a request for certification with a designated local agency is not sufficient for claiming the WOTC on an employer’s federal income tax return. The employer must receive actual certification from the designated local agency in order to claim the WOTC. Please contact Bob Maida at 412-232-1591 with questions on IRS Notice 2015-13 and the Work Opportunity Tax Credit.

For more information about TWIST or to view archived episodes, please visit our TWIST homepage.

 Subscribe to TWIST via iTunes, or  Subscribe via RSS.

To receive TWIST e-mails each Monday morning, make sure that state, local and indirect is checked off as one of your topics of interest on the KPMG TaxWatch registration site.

The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.