Work Opportunity Tax Credit

The Department of the Treasury and the Internal Revenue Service (IRS) recently issued Notice 2020-23. In addition to other relief, the notice extends the due date for certain time-sensitive acts specified in Revenue Procedure 2018-58, 2018-50 IRB 990. Under the notice, a time-sensitive act due to be performed on or after April 1, 2020, and before July 15, 2020, can be performed by July 15, 2020. This includes the requirement for an employer seeking to qualify to claim the Work Opportunity Tax Credit to send IRS Form 8850 to a State Workforce Agency no later than 28 days after an individual begins working for the employer. As a result, under the notice, employers that otherwise would be required to submit IRS Form 8850 to a State Workforce Agency on or after April 1, 2020, and before July 15, 2020, have until July 15, 2020, to submit IRS Form 8850. See Notice 2020-23 for additional information at: https://www.irs.gov/newsroom/irs-extends-more-tax-deadlines-to-cover-individuals-trusts-estates-corporations-and-others.

Update: January 3, 2020

On December 20, 2019, Congress passed legislation that included Section 143 of HR 1865. WOTC is authorized until December 31, 2020. Additionally, Empowerment Zones were extended retroactively from January 1, 2018, through December 31, 2020.

DOL Guidance states that SWAs are to continue to conduct WOTC business by processing and issuing determinations for all WOTC target groups except Empowerment Zones.

See Guidance below:

• (All WOTC Targeted Groups except Empowerment Zones) For employers' new hires made on or after January 1, 2020: SWAs must process certification requests and issue determinations using WOTC IRS Forms and ETA Forms for employers' new hires made on or after January 1, 2020.
• (Empowerment Zones Targeted Group Only) For employers' new hires made on or after January 1, 2018, through December 31, 2020: SWAs must accept, date stamp, log, and retain certification requests using WOTC IRS Forms and ETA Forms for employers' new hires made on or after January 1, 2018, through December 31, 2020, until informed otherwise by ETA.

The WOTC Unit will continue "business processing" as usual for all 2020 submissions except for the expired EZ target groups. Once DOL provides guidance on the Empowerment Zones, the WOTC Unit will conduct an automatic reconsideration for those timely filed submissions.

Qualified Wages for New Qualified Long-Term Unemployment Recipient Target Group

The 1996 legislative provisions that apply to most adult non-veteran target groups for “qualified wages” and amount of tax credit employers can claim for new hires certified under those target groups also apply to the new target group employees hired after December 31, 2015. Qualified wages for certified new hires under the new Qualified Long-Term Unemployment Recipient target group are also capped at $6,000, during the first year of employment, for a maximum tax credit of up to $2,400 depending on the number of hours the new hire works (how the new hire meets the provisions of the Minimum Employment or Retention Period).

Tax Credit Amounts & the Minimum Employment or Retention Period for New Qualified Long-Term Unemployment Recipient Target Group

• For WOTC-certified new hires working at least 120 hours, employers can claim 25% of the first year wages paid up to $6,000, for a maximum income tax credit of up to $1,500.
• For WOTC-certified new hires working 400 hours or more, employers can claim 40% of the first year wages paid up to $6,000, for a maximum income tax credit of up to $2,400.
• The PATH Act retroactive extension applies to individuals who begin work for an employer (and are certified under any of the existing current target groups) after December 31, 2014.
• The PATH Act provisions that cover the new target group apply to individuals who begin to work for an employer after December 31, 2015 (on or after January 1, 2016).An employer that hires a member of a target group described in §51(d)(1)(A) through (d)(1)(J) of the Code, including a long-term unemployment recipient who begins work for that employer on or after September 1, 2016, is not eligible for the transition relief described in this notice with respect to any such new hire.

All related questions should be sent to the Ask.WOTC@dol.gov email address.

TEGL Guidance

TEGL No. 25-15 Change 1 states that as a postmark date on/after April 12, 2017, SWAs may ONLY issue the ETA Form 9063- (OMB No. 12050371) Employer Certification Form for all WOTC target groups only if submitted on ETA forms (Revised May 2016) with OMB Control Number 1205-0371 and IRS Form 8850 (Revised March 2016) with OMB Control Number 1545-1500.

Within 28 days of the employee’s start date, employers hiring individuals from one or more of the identified target groups must complete the following:

• IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit
• ETA Form 9061, Individual Characteristics Form (If the new hire has been given the ETA Form 9062, Conditional Certification, it may be used in lieu of the ETA Form 9061.)

TEGL Guidance
TEGL No. 25-15 Change 1 states that as a postmark date on/after April 12, 2017, SWAs may ONLY issue the ETA Form 9063- (OMB No. 12050371) Employer Certification Form for all WOTC target groups only if submitted on ETA forms (Revised May 2016) with OMB Control Number 1205-0371 and IRS Form 8850 (Revised March 2016) with OMB Control Number 1545-1500.

Mail, fax, or e-mail forms to:

Texas Workforce Commission
WOTC Unit
101 E 15th Street, Room 202T
Austin, Texas 78778-0001
Fax: 512-463-8819
wotc@twc.state.tx.us

If you are filing the forms by e-mail, the attached forms must be password-protected, and the password must be sent in a separate e-mail to the same e-mail address. Employers and consultants submitting forms by fax or e-mail will be required to maintain the original forms for the required retention period (four years for certifications and one year for denials).

When an incomplete WOTC application is submitted by the employer, TWC's WOTC Unit will send a needs request letter to the employer. The employer must respond within 60 days or the application will be closed.

• View form field explanations for IRS Form 8850 and ETA Form 9061

The State of Texas Tax Refund for Employers of TANF or Medicaid Clients is another tax benefit for employers. To qualify, an employer must:

• Pay certain State of Texas taxes
• Have paid wages during the first year of employment to a Texas resident who received at least one month of TANF or Medicaid benefits within six months of the employee start date
• Have provided and paid part of a qualifying employee’s HMO health plan, self-funded or self-insured ERISA plan, or a health plan approved by the Texas Commissioner of Insurance

Under the State of Texas Tax Refund for Employers of TANF or Medicaid Clients program, an employer may receive a refund of up to $2,000 for each qualifying employee hired.

To apply, complete TWC Form 1098, Application for Refund of Taxes Paid to the State of Texas.

Mail form to:

Texas Workforce Commission
WOTC Unit
101 E 15th St, Rm 202T
Austin, TX 78778-0001

Forms must be mailed on or after January 1 and before April 1 of the calendar year following the year taxes and wages were paid.