The Work Opportunity Tax Credit provides the chance for thousands of dollars in relief for employers who hire from targeted groups historically faced with significant barriers to employment. From qualified veterans to ex-convicts and Supplemental Nutrition Assistance Program recipients, realized credits can be in excess of $9,000 per qualified employee.

Eligibility Requirements

Administered by the Internal Revenue Service (IRS) and Department of Labor, the federal credit is available for qualified employees who begin work on or before December 31, 2025. According to the Department of Labor, approximately 1.6 million certificates were issued to employers seeking the credit in 2020. In fiscal year 2021, that figure jumped to more than two million.

Targeted groups from which prospective employees are eligible include those hired within a year of being convicted or released from prison on a felony; residents of empowerment zones or rural renewal counties; SNAP recipients; and those experiencing long-term unemployment to the tune of 27 consecutive weeks.

Also eligible are individuals whose families are recipients of state assistance; recipients of supplemental security income benefits; people referred to an employer after completing a rehabilitation program; summer-youth employees; and veterans.

Each of those groups has additional qualifying components to meet eligibility requirements. For more information, click here.

Getting Started

The process begins once a job offer has been made, with the employer then having 28 days from the employee’s start date to submit a Pre-Screening Notice and Certification Request for the Work Opportunity Credit. That document is then submitted to the state workforce agency.

If the employee is found eligible, employers then claim a general business credit against their income taxes. Tax-exempt employers can still benefit from the tax credit, only having to claim the credit against their payroll taxes. Tax credits range from more than $1,000 for summer-youth employees to $9,600 for certain qualifying military veteran employees.

Job seekers falling within those targeted groups can also get a jump start on the process by receiving a conditional certification from state workforce agencies. That pre-certification can then be used during the job search.

The Department of Labor notes that the credit is generally 40% of qualified wages for those working 400 or more hours during their first year of employment. That figure is 20% for those working at least 120 hours. Most targeted groups come with a cap of $6,000, which equates to $2,400 in credit. For qualified veterans, that cap is $24,000.

For more information on getting started, visit the link above.

Finding Job Candidates In Targeted Groups

The Department of Labor recommends partnerships with American Job Centers, which can help connect employers with qualifying job seekers through job fairs, skills assessments and more.

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