Work Opportunity Tax Credit (WOTC)

The Work Opportunity Tax Credit (WOTC) was created by the Small Business Job Protection Act of 1996. The Taxpayer Relief Act of 1997 ("the Act") extended the Work Opportunity Credit to June 30, 1998 and changed the credit to a two-tier credit, based on how long the individual is employed. The Act added the new Welfare-to-Work credit effective for qualified individuals who begin work after December 31, 1997 and before May 1, 1999. Who can benefit?

	Employers who want to save money on payroll expenses can get a tax credit
	Jobseekers who are members of one of the eligible target groups can become more attractive candidates for jobs.

Eligible Targeted Groups

	Qualified AFDC/TANF welfare recipient for 9 months within the last 18 months
	Qualified veteran food stamp recipient for 3 month period within last 12 months
	Qualified ex-felon member of low income family
	18-24 year old residing in federal empowerment zone/enterprise community
	Individual referred by State rehabilitation agency or VA rehabilitation office
	Qualified summer youth residing in federal empowerment zone/enterprise community
	18-24 years old food stamp recipient for last the 6 months or 3 of the last 5 months but no longer eligible
	Individual certified as receiving Social Security Supplemental Security Income for any month ending in 60 day period ending on hire date.

How much is the tax credit?

WOTC: 2-Tier Tax Credit for 1 year

$	Tier 1: 25% of first $6,000 in qualified wages if WOTC eligible employee works at least 120 hours but less than 400 hours. Maximum: $1,500
$	Tier 2: 40% of first $6,000 in qualified wages if WOTC eligible employee works 400 hours or more. Maximum: $2,400

Welfare-to-Work: 2-year Tax Credit

The WtW eligible employee must be employed at least 180 days or 400 hours in the year for which the credit it claimed.

$	Year 1: 35% of the first $10,000 in qualified wages. Maximum: $3,500.
$	Year 2: 50% of the first $10,000 in qualified wages. Maximum: $5,000.

WELFARE-TO-WORK TAX CREDIT
(WtW)
Effective January 1, 1998 through April 30, 1999

Eligible targeted group:

	AFDC/TANF recipients for at 18 consecutive months ending on the hiring date; or
	Whose AFDC/TANF eligibility expired under federal/state law after August 5, 1997, for applicants hire within 2 years after their eligibility expired: or
	That received family assistance for a total of at least 18 months after August 5, 1997.

How to apply for the WOTC and WtW Tax Credits

If an employer believes that a potential employee is eligible for one of the targeted groups, the employer should:

	Complete the bottom portion and have the potential employee complete the top portion of the IRS Form 8850.
	Submit the IRS Form 8850 to the nearest Workforce Development Division (WDD) office within 21 days of the job start date.
	To expedite processing send a completed ETA form 9061 and any other eligibility documentation with the IRS Form 8850.
	To get copies of all forms, contact the nearest WDD office.

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