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Work Opportunity Tax Credit - IRS PATH Act Guidance Suspends 28-Day Rule until June 2016

03/08/2016  |  By: Brian McCuller, JD, CPA, Shareholder, Practice Leader Tax


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The Work Opportunity Tax Credit (WOTC) provides tax incentives for employers hiring employees from certain targeted groups. 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.

For the first few months of 2016, the lingering question was how the IRS would treat new hires made in the 2015 retroactive year. Newly issued guidance from the IRS has provided the answer.

Generally, the rules require that applications for new employees under the WOTC program must be submitted within 28 days of the hiring date or the potential credit will be lost. However, the IRS has recognized that applying the 28-day rule to 2015 would be impractical or impossible for most employers.

Fortunately, the IRS has decided to suspend the 28-day rule for 2015 and has also extended the grace period through the first half of 2016! This means that employers will be able to take advantage of the WOTC program for employees hired between January 1, 2015 and May 31, 2016 even though they are outside the 28-day window.

Employers should strongly consider putting a WOTC plan in place to capture any retroactive credits and to maintain an ongoing program for the years to come.

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.

Tagged with: Credit and Incentive, WOTC