Overview

The Work Opportunity Tax Credit (WOTC) is a federal income tax benefit administered by the U.S. Department of Labor (DOL) for employers who hire individuals from specified target populations. WOTC reduces a business’s federal tax liability, serving as an incentive to select job candidates who may be disadvantaged in their efforts to find employment.

The main objective of this program is to enable individuals to become employed, earn a steady income and become contributing taxpayers. WOTC joins other workforce programs that help provide incentives for workplace diversity and improve access to good jobs for American workers.

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News for Employers & Consultants

Texas Winter Storm Transition Relief

The Internal Revenue Service (IRS) has issued two notices that provide Transition Relief (TR) due to the Texas Winter Storm (TWS) event that began on February 11, 2021. Notices TX-2021-02 and IR-2021-43 were issued on February 22, 2021, and provide a postmark extension from February 11 to June 15, 2021, that applies to ALL 254 Texas counties. Consultants and employers have until June 15, 2021, to postmark IRS Form 8850 submissions due during that period.

TX-2021-02, February 22, 2021

Following the recent disaster declaration issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers will receive tax relief.

Individuals and households affected by severe winter storms that reside or have a business in all 254 Texas counties qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after February 11, 2021, and before June 15, 2021, are postponed through June 15, 2021. 

IR-2021-43, February 22, 2021

TEXAS—Victims of winter storms that began February 11, 2021, now have until June 15, 2021, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

During the TWS TR period, all claims should be made using your standard submission method, with the exception of claims made using fax or postal mail. If fax or postal mail is your usual submission method, the WOTC Unit suggests you consider moving to scanning and emailing claims, if possible, to prevent delays in data entry.

If you are interested in the WOTC Unit bulk upload process, please send an email to the WOTC Unit email address for further information. The Texas WOTC Unit will suspend untimely denials during this relief period. If you receive an untimely denial while our IT Unit is working on suspending the process, please disregard. Any untimely denials that are issued during the suspension will be automatically reconsidered.

Please submit any questions to wotc@twc.texas.gov.

WOTC Reauthorized through December 31, 2025

The Consolidated Appropriations Act, 2021PDF (the Act) was passed by Congress on December 21, 2020, and signed by the president on December 27, 2020. The Act reauthorizes the Work Opportunity Tax Credit until December 31, 2025. Additionally, the Act extends empowerment zone designations from December 31, 2020, to December 31, 2025.

State workforce agencies (SWAs) should continue the uninterrupted processing of employers’ timely filed certification requests and issuance of determinations (certifications or denials) for individuals who began to work for an employer on or after January 1, 2021, and before January 1, 2026, for all currently reauthorized targeted groups, including the extension of designated empowerment zones.

As a reminder, SWAs should continue processing certification requests for individuals eligible under IRS Notice 2020-78, WOTC Transition Relief, received by January 28, 2021. The transition relief applies to members of the designated community resident targeted group or the qualified summer youth employee targeted group residing within an empowerment zone who began work on or after January 1, 2018, and before January 1, 2021. For additional information about the IRS WOTC Transition Relief, refer to IRS Notice 2020-78PDF

Please note that employers and consultants do not need to resubmit applications previously sent to TWC. We have begun reconsideration of previously submitted applications beginning with calendar year 2018 and will continue the process based on date of submission. 

If you have any questions, please contact the WOTC Help Desk at wotc@twc.texas.gov.

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

The 1996 legislative provisions that apply to qualified wages for most adult, non-veteran target groups and the amount of tax credit employers may claim for new hires certified under those target groups also apply to new target group employees hired after December 31, 2015. Qualified wages for certified new hires in the new qualified long-term unemployment recipient target group are 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 and whether the new hire meets the provisions of the minimum employment or retention period.

 

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Qualifying for WOTC

Employers are eligible for a tax credit when hiring individuals with specified barriers to employment identified as target groups. TWC will verify for employers which target group applies. Tax credits currently are available for hires in the following categories:

Veterans

Target Group Maximum Tax Credit
Disabled veterans with a service-connected disability who have been unemployed for at least six months $9,600
Veterans who have been unemployed for at least six months $5,600
Disabled veterans with a service-connected disability $4,800
Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits $2,400
Veterans who have been unemployed for at least four weeks $2,400

Non-Veterans

Target Group Maximum Tax Credit
Long-Term Family Assistance recipients who are members of a family that has received Temporary Assistance for Needy Families (TANF) benefits for at least 18 consecutive months $9,000
TANF recipients $2,400
Ex-felons
Designated community residents
Vocational rehabilitation referrals
SNAP recipients
Supplemental Security Income recipients
Long-Term Unemployment Recipients
Summer Youth program participants who are 16 to 17 years old, work between May 1 and September 15 and live in an empowerment zone $1,200

 

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Applying for WOTC

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:

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: 512-524-9124
wotc@twc.texas.gov

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).

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Requesting a Claim Reconsideration

When a WOTC application is denied, if the employer has documentation to indicate that the application was eligible for certification, the employer may request that the claim be reconsidered for a specific target group. If you would like to request a claim reconsideration, please provide the documentation listed below for the applicable target group. All requests for reconsideration must include supporting documentation in order to be processed. Please include the WOTC claim/control number listed on the denial letter or denial report. Reconsideration requests must be submitted within the one-year required retention period for denials based on original data.

Veteran Target Groups (includes disabled veteran and unemployed veteran)

  • Applicant’s DD-214 (record of military service)
  • Rating letter (provides service-connected disability rating required for disabled veterans)

No unemployment documentation is necessary. Texas’ WOTC unit will verify the "unemployment" requirements for disabled veterans and unemployed veterans.

Ex-Felon

  • Court documentation indicating felony conviction; or
  • If a federal conviction, parole/probation officer information including name and phone number

Designated Community Resident

  • Documentation to verify address (e.g., a current utility bill, telephone bill, or driver license) indicated on IRS Form 8850

Vocational Rehabilitation

  • Individualized Plan for Employment (IPE) documentation indicating open date, close date, and/or last date of service
  • Vocational counselor information including name and phone number

Long-Term Unemployment Benefits

  • Submission of ETA Form 9175, Long-Term Unemployment Recipient Self-Attestation Form – Work Opportunity Tax Credit (WOTC) Program

Out-of-State Benefits

If you have information that indicates the applicant received TANF, Supplemental Security Income, SNAP benefits, or unemployment benefits from another state, please provide the name of the state, and the Texas WOTC unit will submit an out-of-state request to the indicated state.

Mail request and supporting documentation to:

Texas Workforce Commission
Attn: WOTC Unit
101 East 15th Street, Room 202T
Austin, TX 78778

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Responding to a Needs Request

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.

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Calculating the Tax Credit

The tax credit amount under the WOTC program depends on employee retention. For most target groups, WOTC is based on qualified wages paid to the employee for the first year of employment. The credit to for-profit employers is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours, and 40% for those employed 400 hours or more. The credit to non-profit employers is 16.25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours, and 26% for those employed 400 hours or more. For Long-Term Family Assistance recipients, WOTC is based on a two-year retention period.

Veterans
Target Group Wages Up To For-Profit 25% For-Profit 40%  Nonprofit 16.25% Nonprofit 26%
Disabled veterans with a service-connected disability who have been unemployed for at least six months 24,000 6,000 9,600 3,900 6,240
Veterans who have been unemployed for at least six months 14,000 3,500 5,600 2,275 3,640
Disabled veterans with a service-connected disability 12,000 3,000 4,800 1,950 3,120
Veterans receiving SNAP benefits 6,000 1,500 2,400 975 1,560
Veterans who have been unemployed for at least four weeks 6,000 1,500 2,400 975 1,560
Non-Veterans
Target Group Wage Cap For-Profit 25% For-Profit 40% For-Profit 50%
Long-Term Family Assistance recipients who are members of a family that has received TANF benefits for at least 18 consecutive months (First Year) 10,000 N/A 4,000 N/A
Long-Term Family Assistance recipients who are members of a family that has received TANF benefits for at least 18 consecutive months (Second Year) 10,000 N/A N/A 5,000
TANF recipients 6,000 1,500 2,400 N/A
Ex-felons 6,000 1,500 2,400 N/A
Designated community residents 6,000 1,500 2,400 N/A
Vocational rehabilitation referrals 6,000 1,500 2,400 N/A
SNAP recipients 6,000 1,500 2,400 N/A
Supplemental Security Income recipients 6,000 1,500 2,400 N/A
Long-Term Unemployment Recipients         6,000              1,500              2,400               N/A
Summer Youth program participants who are 16 to 17 years old, work between May 1 and September 15 and live in an empowerment zone 3,000 750 1,200 N/A

 

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State of Texas Tax Refund

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 TexasPDF.

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.

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Forms

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.

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