Hiring Credits

IRS Provides Additional Transition Relief for Work Opportunity Tax Credit



Jeff Aleixo

Employers are allowed to retroactively capture any missed Work Opportunity Tax Credit (WOTC) related to employees hired from January 1, 2015 through August 31, 2016 and have until the extended due date of September 28, 2016 to submit the required Internal Revenue Service (IRS) Form 8850.


The Internal Revenue Service has issued a notice pertaining to additional relief for employers claiming Work Opportunity Tax Credit.

Notice 2016-40 shows additional transition relief for employers claiming WOTC under Sections 51 and 3111 (e) of the Internal Revenue Code. Therefore, extending and amending by the Protecting Americans from Tax Hikes Act of 2015, also known as the PATH Act. Notice 2016-22, issued in March by the IRS, aims for guidance and transition relief for employers claiming WOTC.

Passed last December by Congress, the PATH Act amended the Tax Code, allowing it to extend the WOTC through Dec. 31, 2019. Also, the PATH Act amended the Tax Code to grow the “selected groups” of individuals, the employment of which could help the employer for credit shown in the statute, to address qualified long-term unemployment for persons who have remained unemployed for 27 weeks or longer.

Furthermore, Notice 2016-40 extends the transition relief by three months to Sep. 28, 2016, opposed to previous Notice 2016-22, which had a deadline of June 28, 2016. In order to meet these requirements, the notice applies to employers that (1) hire members of selected groups on or after Jan.1, 2015, and on or before Aug. 31, 2016. Also, (2) hiring members of a new selected group of qualified long-term unemployment recipients on or after Jan. 1, 2016, and on or before Aug, 31, 2016.

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