Hiring Credits

WOTC Retroactive Authorization Through End of 2014


Emptech's founder, Jeff Aleixo


Jeffrey Aleixo

wotc retroactive authorization stamp authorized form

WOTC Retroactive Authorization in Late December

Many employers know by now that a lapse in the federal Work Opportunity Tax Credit (WOTC) program should not deter them from making strategic hiring decisions and submitting timely WOTC certification requests.

It has become a tradition for the WOTC credit program to expire and go unrenewed throughout the year, or a hiatus period, only to be retroactively reinstated. Since its creation by the Small Business Job Protection Act of 1996, WOTC retroactive authorization happened nine times in 18 years. Renewal periods typically range from 12 to 44 months, and for renewals passed following a hiatus, WOTC retroactive authorization is the norm.

However, retroactive may apply to agency processing of certification requests, but that does not mean it applies to employers’ certification submissions. Employers who fail to submit their WOTC certifications timely throughout a hiatus risk missing out on an important savings opportunity.

Employers who did submit WOTC certification requests throughout the 2014 hiatus will soon see their diligence rewarded. Just before the end of 2014, President Obama signed the Tax Increase Prevention Act of 2014 (P.L. 113-295), resulting in WOTC retroactive authorization through December 31, 2014, with no change to program requirements or target groups. This also means that as of January 1, 2015, the WOTC program is again on hiatus.

Use this comprehensive guide to find all the necessary information about the WOTC Program, its advantages, and how to benefit from this Federal tax incentive.

The Federal Empowerment Zone Credit and Indian Employment Credits Also Extended

In addition to WOTC retroactive authorization, Federal Empowerment Zone Credits are available to businesses in 23 states, with a 15% credit on up to $20,000 of wages paid to employees living and working in Empowerment Zones.

Indian Employment Credits are available to businesses employing enrolled members of an Indian tribe or their spouses who live and work on or near a reservation. The credit is 20% of up to $20,000 in wages, but employees with wages of over $45,000 are ineligible.

With the WOTC hiatus period extending across all of 2014, there is a backlog of 2014 requests to be processed by the state agencies, which means delays are to be expected, but things are set in motion.

In 2014, the Employment and Training Administration (ETA) issued Training and Guidance Letter (TEGL) No. 8-13 which advised that state workforce agencies (SWAs) must accept and date stamp, log, and retain, as well as possibly start to process applications, but postpone final processing until WOTC retroactive authorization. They are advised the same thing now.

Apply for WOTC despite of the Hiatus

Employers should not be deterred by the hiatus in WOTC program authorization. They can continue to hire, complete WOTC forms 8850 and 9061, and submit them to the states under the same timeliness and compliance regulations as always. Employers will only face the minor inconvenience of a longer processing period as state agencies work their way through the backlog due to WOTC retroactive authorization.

Do not be discouraged by the hiatus or the delay in the processing of WOTC credits. Employers should continue to submit all WOTC certification requests within 28 days of signing by the new hire to ensure all forms remain timely and compliant. These efforts will pay off with important savings.

Latest WOTC Authorization

The Work Opportunity Tax Credit (WOTC) has been in existence for years. According to section 142 of the Protecting Americans from Tax Hikes Act of 2015, the credit was extended for five years, including employees hired through December 31, 2019. The WOTC retroactive authorization continues to provide employers with the opportunity to hire individuals in designated target groups who have trouble competing in the job market and to receive a tax credit for doing so. With the recent extension of the target groups to include qualified long-term unemployment recipients, the number of qualified employees has greatly increased.

Since its inception, WOTC has benefitted employers and employees as well as the government and taxpayers. Compliance with the requirements to earn this incentive can be challenging due to deadlines established by law, complex administration, and the high possibility of costly mistakes. However, this can be easily overcome with automated WOTC solutions. Employers can maximize credit yield without additional expenses by outsourcing the WOTC administration and automating the entire process. The latest WOTC retroactive authorization still leaves time for employers to achieve tax credit savings and embracing technological advancements is the first step in the process of taking advantage of this lucrative tax incentive.

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

Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.
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