Work Opportunity Tax Credit - Program Overview

The Work Opportunity Tax Credit (WOTC) is a federal income tax benefit administered by the U.S. Department of Labor (DOL) for private, for-profit 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.

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Customers

Eligible employers can receive a federal tax credit ranging from $1,200 to $9,600 for each qualified employee hired under the WOTC program, or $9,000 over a two-year period for employees hired who were long-term public benefit recipients prior to hire. Participating employers who receives a WOTC certification will use IRS Forms 5884 and 3800 to claim the Work Opportunity Tax Credit.

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 Temporary Assistance for Needy Families (TANF) or Medicaid benefits within six months of the employee start date; and 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 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.

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Authority & Funding

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.

  • SWAs should continue the uninterrupted processing of employers’ timely filed certification requests and issuance of determinations (certifications or denials) for individuals that 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 the IRS Notice 2020-78 available at https://www.irs.gov/pub/irs-drop/n-20-78.pdf.

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Service

WOTC contact information
-     Call: 800-695-6879
-     Email: wotc@twc.texas.gov