What is it?
A one-time federal tax credit available to employers who hire new employees from a
qualified population of low-income groups, including workers with disabilities. The credit is:
Up to 40% of the first $6,000 in paid wages ($2,400 per employee) if the individual
works a minimum of 180 days or 400 hours.
Up to 25% of the first $6,000 in paid wages ($1,500 per employee) if the individual
works a minimum of 120 hours but less than 400 hours.
For qualified summer youth, the credit is 25% of the first $3,000 in first-year wages
paid during the 90-day summer working period, allowing a maximum credit of $750.
Who qualifies?
Temporary, seasonal, part-time, and full-time employees who fall under any of the
following categories qualify (see WOTC Supplement for a description of eligible
participants):
- Recipients of Temporary Assistance for Needy Families (TANF)
- Veterans (includes a new subcategory of Disabled Vets)
- Ex-Felons
- Designated Community Residents (DCR) 18-39 years of age
- Vocational Rehabilitation Referrals
- Summer Youth
- Food Stamp Recipients
- Supplemental Security Income (SSI) Recipients.
Employer
The Employer may:
- Claim an unlimited number of employees.
- Claim the tax credit along with Maryland’s Employment Opportunity Tax
Credit (EOC), Disability Employment Tax Credit (MDETC), and Enterprise Zone tax
credits if the employee is qualified.
The Employer may not:
- Claim the tax credit for certain relatives of employers, nor for rehired workers who
were not certified during their previous employment.
- Claim the tax credit for an employee on an on-the-job training contract, but credit may
be claimed for wages paid after the OJT contract has expired. The employee must have been
qualified for the WOTC before the starting date. The time spent with the employer doing
on-the-job training qualifies the employer toward fulfilling the retention period.
- Ask an applicant if he or she is a person with a disability for tax credit or other
purposes.
What You Need to Know About the Process
Understand the documents
IRS form 8850 is
used:
- To determine whether an applicant appears to fall into an eligible target group
for the tax credit; AND
- To formally request that a State Employment Security
Agency (SESA) - in this case the Maryland State Department of Labor, Licensing, and
Regulation (DLLR) - certify the applicant’s eligibility. This form should be
presented to the employer on the day of the applicant’s job offer, interview, or
prior to the interview.
Individual Characteristics Form (9061,
PDF document, download
Adobe Acrobat for free) -
(for job seekers served by a SESA or where the process is initiated by the employer):
This form is used in conjunction with the Prescreening Notice &
Certification Request form to determine tax credit eligibility and request
certification from DLLR. Documentation supporting the individual’s eligibility
must be submitted before this form can be processed and final certification issued.
Conditional Certification Form (9062) - (for job seekers already served by
agencies other than SESA): This form is used by other participating agencies to verify
that an individual is job-ready and eligible for the tax credit. This form will alert the
employer that the job candidate is eligible for the tax credit. Example of above agencies
are qualified rehabilitation programs, public assistance offices, and veteran’s
programs. The MSDE Division of Rehabilitation Services (DORS) will qualify conditionally
certified job applicants with disabilities.
Participants are encouraged to submit all forms at once to expedite the process.
Employer Certification Form (481-B) is issued by DLLR following review of the
appropriate above documents. This form constitutes final certification of a
candidate’s eligibility for the WOTC program.
To obtain tax credits, employers should submit IRS Form 5884 when filing their tax returns.
The Employer
When the job offer is made, all employer information must be completed on the
Pre-Screening Notice & Certification Request Form (8850).
The form, signed by both the applicant and the employer, must then be sent to
DLLR with a postmark on or before the 28th day of employment.
- If the Individual Characteristics Form (9061,
PDF document, download
Adobe Acrobat for free) is used, it needs to be sent as soon as possible
to DLLR (preferably sent with the Pre-Screening Notice). This form needs to
be attached to applicant eligibility documentation or specify what
documentation will be sent.
- If the Conditional Certification Form is used, the employer
declaration on that form must be completed, and the form
must be sent together with the Pre-Screening Notice to DLLR
within 28 days of employment.
- Once the employer receives certification, the employer should retain
the certification as proof of eligibility to obtain credit.
- Employer should be reminded to obtain IRS Form 5884 to claim the credit
on their tax returns.
Providers can offer assistance by sending the forms to DLLR for the employer.
The Certifying Agency, DLLR, will provide final certification of
a job seeker’s eligibility for the WOTC program.
- DLLR will determine the job seeker’s eligibility after receiving the
Pre-Screening Notice and either the Individual
Characteristics Form (along with eligibility documentation)
or the Conditional Certification Form.
- If eligibility is approved, DLLR will then issue the Employer Certification Form to the employer.
Authorization
This program was created by the Small Business Protection Act of 1996
(Public Law 104-188) and extended by the Taxpayer Relief Act of 1997 through June 30, 1998.
Reauthorization was granted under the "Ticket to Work" and the Work
Incentives Improvement Act of 1999 (Public Law 106-170) for a 30 month period
retroactive to July 1, 1999 through December 31, 2003; and additional federal
legislation.
Categories of Individuals That Qualify for the WOTC
Temporary, seasonal, part-time, and full-time employees who fall under
any of the following categories qualify.
Recipients of Aid to Families with Dependent Children (AFDC / TCA)
Individual must have received this benefit, for any 9 months within the most
recent 18 months, ending on the hiring date.
Veterans
Must be a person who has served on active duty in the U.S. Armed Forces for a period of
more than 180 days, or was discharged or released from active duty for a service-connected
disability, and a member of a family that received food stamps for a period of 3 months during the
most recent 15 months ending on the hiring date.
Disabled Veterans are those who receive compensation for a service-connected
disability and Have a hiring date which is not more than one year after having
been discharged or released from active duty in the Armed Forces of the United
States; or have aggregate periods of unemployment during the one-year period
ending on the hiring date equal to or exceeding six months. The amount of
qualified wages for this group only is increased from $6,000 to $12,000
Ex-Felons
Must be a person convicted of a felony under any Federal or state law, and must
meet the following qualifications - Hired date not more than one year after the
conviction or release from prison for that felony.
Designated Community Resident (DCR)
Must have attained age 18 but not yet be 40 on the hiring date
His/Her principal place of abode must be within an Empowerment Zone (EZ),
Renewal Community(RC) or Rural Renewal County (RRC).
Vocational Rehabilitation Referral
Must be a person having a disability
which results in s substantial barrier to employment, and must have been referred to an
employer after completing or while receiving rehabilitation services according to an
individualized written rehabilitation plan under the state plan for vocational
rehabilitation services or vocational rehabilitation program for veterans.
Summer Youth
Must be a person who performs work for the employer between May 1st and September 15th
AND meets all of the following qualifications. Between the ages of 16 and 17 on the hiring
date (or by May 1st of the year involved) or has not worked for the employer before,
AND lives within a Federal Empowerment Zone or Enterprise Community.
Food Stamp Recipient
Must be a person who is at least 18 but not yet 40 years of age AND
Must be a member of a family receiving assistance under a food stamp program for the 6
months ending on the hiring date OR that received food stamp for at least 3 months
of the last 5 months ending on the hiring date, but is no longer receiving them.
Supplemental Security Income (SSI) Recipient
Must be a person receiving SSI benefits for any month during the 60 days preceding the date of
hire.
For further details on these categories, see instructions for IRS Pre-Screening &
Certification Request form. Contact the Tax Credit Program Unit at 410-767-2080 or 2047.
Where to go for more information:
Department of Labor, Licensing and Regulation (DLLR)
Belinda Duncan
Tax Credit Program Administrator
1100 N. Eutaw Street, Room 201
Baltimore, MD 21201
Telephone: 410-767-2047
Fax 410-767-2078
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