IRS Extends Time for Filing 8850 to Claim Work Opportunity Tax Credit

Prior to the mid-December 2014 enactment of the Tax Increase Prevention Act of 2014, the Work Opportunity Tax Credit (WOTC) was set to exclude employees, except for certain qualifying veterans, hired after December 31, 2013. However, the Act of 2014 retroactively extended the WOTC to include employees hired on or before December 31, 2014.Last Thursday, the IRS announced that it was extending the time employers that want to claim the work opportunity tax credit (WOTC) have to file Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit), which is a prerequisite to claiming the WOTC.Usually this form is due no later than 28 days after an employee begins work. Given the retroactive implementation of the credit for the 2014 tax year, the IRS is giving employers until April 30, 2015 to submit this form.Work Opportunity Tax Credit - SummaryThe WOTC can be claimed by employers on an elective basis for a portion of first year wages paid to employees who fall into certain targeted groups (generally, economically disadvantaged, disabled persons, or certain veterans).These groups include: (1) qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program, (2) qualified veterans, (3) qualified ex-felons, (4) designated community residents, (5) vocational rehabilitation referrals, (6) qualified summer youth employees, (7) qualified members of families in the Supplemental Nutritional Assistance Program (SNAP), (8) qualified Supplemental Security Income recipients, or (9) long-term family assistance recipients.The WOTC usually equals 40% of eligible wages paid - up to a maximum of $6,000 in wages per employee paid during the first year of employment (maximum $2,400 credit per employee). For several categories of qualified veterans, more than $6,000 of first-year wages are eligible for the credit.Absent new legislation, the WOTC does not cover individuals who begin work for the employer after 2015.If you have hired anyone that meets these qualifications in 2014, please contact HHM for more details.