WORK OPPORTUNITY TAX CREDIT (WOTC)
What is the WOTC Program?
The WOTC program is a federal tax credit program offered to employers as an incentive to hire people in seven targeted groups who face significant barriers to employment. The WOTC program was created by the Small Business Job Protection Act (Public Law 104-188) and amended by H.R. 2014. Changes made by H.R. 2014 are effective October 1, 1997, and the WOTC program is extended through year 2003.
Who is Helped by the WOTC Program?
WOTC helps both the employer and targeted job seekers. The employer saves because the tax credit helps defray payroll expenses. A job seeker who qualifies for one of the targeted groups gains an advantage in the job market.
How Much is the Tax Credit?
There is a two-tiered tax credit based on the first $6,000 of earnings:
a. A 25% credit for workers who worked at least 120 hours but less than 400 hours
b. A 40% credit for workers who worked at least 400 hours ($2,400 maximum credit)
What are Qualified Wages?
Wages considered as qualified for a tax credit are the first-year wages paid or incurred to target group individuals who begin work for the employer after September 30, 1997. Wages cannot be taken into account for any individual unless that individual is employed for at least 120 hours of work.
Who are the Targeted Groups?
a. TANF (AFDC) Recipient - a member of a family that has received assistance from the
Temporary Assistance Program (TANF)/(AFDC) for at least any nine months within the last 18
b. Food Stamp Recipient - a member of a family that has recieved food stamps for the last six
months, OR recieved food stamps for at least three of the last five months, BUT is no longer eligible
to recieve them, AND,
is at least 18 but no age 25 on the hiring date.
c. Veteran - a veteran and member of a family that has recieved Food Stamps for at least a
three-month period within the last 15 months
d. Vocational Rehabilitation Recipient - inividual with disability who has received or is receiving
vocational rehabilitation from a rehabilitation agency approved by the state or the Department of
e. Ex-Felon - a person convicted of a felony AND within the past year was either convicted or
released from prison AND during the last six months was a member of a low-income family (income
must be 70% or less of Lower Living Standard Income Level)
f. SSI Recipient - a person who has received Supplemental Security Income (SSI - under Title
XVI of the Social Security Act) benefits for any month ending within the last 60 days.
g. ANY INDIVIDUAL who began work who currently is a participating program recipient of
a conditional certification from a SESA or state or local agency for the welfare to work credit.