Hiring Credits

IRS Provides Additional Transition Relief for Work Opportunity Tax Credit


Emptech's founder, Jeff Aleixo


Jeffrey Aleixo

transition relief for Work Opportunity Tax Credit

Due to transition relief for Work Opportunity Tax Credit employers are allowed to retroactively capture any missed credits 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, making this another change to the program designed to create jobs for economically disadvantaged workers in the U.S.

Notice 2016-40 shows additional transition relief for Work Opportunity Tax Credit under Sections 51 and 3111 (e) of the Internal Revenue Code. Therefore, extending and amending WOTC 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 Work Opportunity Tax Credit.

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 for Work Opportunity Tax Credit by three months to Sep. 28, 2016, opposed to the 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, and
  2. Hire 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.
Find out how WOTC evolved and changed since 1996 to become a cost effective hiring program that benefits employers and employees in numerous ways.

Additional WOTC Information

The IRS issued Notice 2016-40 on June 17, 2016, to provide additional relief for taxpayers to claim the WOTC for the 2015 tax year and 2016 tax year. The WOTC had technically expired as of December 31, 2014, but was retroactively extended by the Protecting Americans from Tax Hikes Act of 2015 for the period 2015 through 2019.

Since its beginning, the WOTC program aims to encourage businesses to hire individuals who fall into one of nine target groups that typically experience significant barriers to employment. Many employers try to take advantage of WOTC, but the labor-intensive administration usually prevents them from fully maximizing their advantage. That is where the advantages of an automated system compatible with the WOTC process come in.

An automated WOTC solution incorporates an integrated WOTC screening process that results in higher application completion rate credits simply because the candidates are able to answer the right questions and finish their applications without making mistakes. In addition to this, the electronic solution eliminates the possibility of lost credits due to the labor-intensive nature of manual paperwork and set deadlines because completed and signed documents are kept securely online in the cloud and can be easily accessed at all times. All things considered, it is time for employers to move on from old-fashioned methods of paper applications, automate and start taking advantage of the tax credits.

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Editor’s Note: This post has been updated for accuracy and comprehensiveness.

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