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IRS Extends Transition Relief for Work Opportunity Tax Credit

06/22/2016  |  By: Brian McCuller, JD, CPA, Shareholder, Practice Leader Tax

Notice 2016-40 extends the WOTC transition relief period for another three months.

The Work Opportunity Tax Credit (WOTC) allows businesses to reduce their federal tax burden if they hire employees from certain target groups — including unemployed veterans, food stamp recipients, people living in certain designated economic zones and ex-felons.

The PATH Act extended WOTC through 2019, including 2015 retroactively, and added a new category of qualified hires targeting the long-term unemployed starting in 2016.

Employers typically must apply for the credit within 28 days of hiring the employee, but since the credit was not renewed by Congress until late last year, the IRS has created a grace period for hires made in 2015 and through 2016. Businesses now have until September 28, 2016, to apply for the credit for employees hired between January 1, 2015, and August 31, 2016.

Long term unemployed employees only qualify for the WOTC if they are hired after January 1, 2016.  The deadline for applying for the credit has been extended to September 28, 2016, for qualified long term unemployment recipients hired on or after January 1, 2016, through August 31, 2016.

With the addition of the long-term unemployed and the extension of the program, businesses who have not taken advantage of this credit in the past should take another look. It is a great opportunity and maintaining a program into the future could mean significant savings.

Reference:  Notice 2016-40

LBMC’s comprehensive WOTC Service covers all facets of the compliance process – from employee screening and processing to forms and certifications.

For more information please contact us.