State offices and all DLLR physical locations will be closed to the public November 26 through November 28, 2014. However, Unemployment Insurance telephone and Web operations WILL be available on Wednesday, November 26.

American Job Centers

 

Work Opportunity Tax Credit - A Federal Tax Credit for Employers

 

The Work Opportunity Tax Credit program’s legislative authority for all WOTC target groups expired on December 31, 2013. As a result, the program currently is undergoing a fiscal authorization lapse.

At this time, we have no indication whether Congress may pass legislation extending authority for the expired program and target groups beyond December 31, 2013. However, in the past, Congress has provided for retroactive certifications, we have no guarantee that this will happen again.

During the” hiatus period” Maryland will continue to receive completed federal tax credit applications submitted in a timely manner (postmarked) no later than 28 days after the employee starts work". Please post as soon as possible.

If you have any questions, please contact Carl Reavis at 410-767-2093 or Belinda Duncan at 410-767-2047. Thank you.

What is it?

A one-time federal tax credit available to employers who hire new employees from a qualified population of low-income groups, including workers with disabilities. The credit is:

Up to 40% of the first $6,000 in paid wages ($2,400 per employee) if the individual works a minimum of 180 days or 400 hours.

Up to 25% of the first $6,000 in paid wages ($1,500 per employee) if the individual works a minimum of 120 hours but less than 400 hours.

For qualified summer youth, the credit is 25% of the first $3,000 in first-year wages paid during the 90-day summer working period, allowing a maximum credit of $750.

Who qualifies?

Temporary, seasonal, part-time, and full-time employees who fall under any of the following categories qualify (see WOTC Supplement for a description of eligible participants):

  • Recipients of Temporary Assistance for Needy Families (TANF)
  • Veterans (includes a new subcategory of Disabled Vets)
  • Ex-Felons
  • Designated Community Residents (DCR) 18-39 years of age
  • Vocational Rehabilitation Referrals
  • Summer Youth
  • Food Stamp Recipients
  • Supplemental Security Income (SSI) Recipients.

Employer

The Employer may:

  • Claim an unlimited number of employees.
  • Claim the tax credit along with Maryland’s Employment Opportunity Tax Credit (EOC), Disability Employment Tax Credit (MDETC), and Enterprise Zone tax credits if the employee is qualified.

The Employer may not:

  • Claim the tax credit for certain relatives of employers, nor for rehired workers who were not certified during their previous employment.
  • Claim the tax credit for an employee on an on-the-job training contract, but credit may be claimed for wages paid after the OJT contract has expired. The employee must have been qualified for the WOTC before the starting date. The time spent with the employer doing on-the-job training qualifies the employer toward fulfilling the retention period.
  • Ask an applicant if he or she is a person with a disability for tax credit or other purposes.

What You Need to Know About the Process

Understand the documents

IRS form 8850 is used:

  1. To determine whether an applicant appears to fall into an eligible target group for the tax credit; AND
  2. To formally request that a State Employment Security Agency (SESA) - in this case the Maryland State Department of Labor, Licensing, and Regulation (DLLR) - certify the applicant’s eligibility. This form should be presented to the employer on the day of the applicant’s job offer, interview, or prior to the interview.

Individual Characteristics Form (9061, PDF document, download Adobe Acrobat for free) - (for job seekers served by a SESA or where the process is initiated by the employer):   This form is used in conjunction with the Prescreening Notice & Certification Request form to determine tax credit eligibility and request certification from DLLR. Documentation supporting the individual’s eligibility must be submitted before this form can be processed and final certification issued.

Conditional Certification Form (9062) - (for job seekers already served by agencies other than SESA):  This form is used by other participating agencies to verify that an individual is job-ready and eligible for the tax credit. This form will alert the employer that the job candidate is eligible for the tax credit. Example of above agencies are qualified rehabilitation programs, public assistance offices, and veteran’s programs. The MSDE Division of Rehabilitation Services (DORS) will qualify conditionally certified job applicants with disabilities.

Participants are encouraged to submit all forms at once to expedite the process.

Employer Certification Form (481-B) is issued by DLLR following review of the appropriate above documents. This form constitutes final certification of a candidate’s eligibility for the WOTC program.

To obtain tax credits, employers should submit IRS Form 5884 when filing their tax returns.

The Employer

When the job offer is made, all employer information must be completed on the Pre-Screening Notice & Certification Request Form (8850). The form, signed by both the applicant and the employer, must then be sent to DLLR with a postmark on or before the 28th day of employment.

  1. If the Individual Characteristics Form (9061, PDF document, download Adobe Acrobat for free) is used, it needs to be sent as soon as possible to DLLR (preferably sent with the Pre-Screening Notice). This form needs to be attached to applicant eligibility documentation or specify what documentation will be sent.
     
  2. If the Conditional Certification Form is used, the employer declaration on that form must be completed, and the form must be sent together with the Pre-Screening Notice to DLLR within 28 days of employment.
     
  3. Once the employer receives certification, the employer should retain the certification as proof of eligibility to obtain credit.
     
  4. Employer should be reminded to obtain IRS Form 5884 to claim the credit on their tax returns.

Providers can offer assistance by sending the forms to DLLR for the employer. The Certifying Agency, DLLR, will provide final certification of a job seeker’s eligibility for the WOTC program.

  1. DLLR will determine the job seeker’s eligibility after receiving the Pre-Screening Notice and either the Individual Characteristics Form (along with eligibility documentation) or the Conditional Certification Form.
     
  2. If eligibility is approved, DLLR will then issue the Employer Certification Form to the employer.

Authorization

This program was created by the Small Business Protection Act of 1996 (Public Law 104-188) and extended by the Taxpayer Relief Act of 1997 through June 30, 1998.  Reauthorization was granted under the "Ticket to Work" and the Work Incentives Improvement Act of 1999 (Public Law 106-170) for a 30 month period retroactive to July 1, 1999 through December 31, 2003; and additional federal legislation.

Categories of Individuals That Qualify for the WOTC

Temporary, seasonal, part-time, and full-time employees who fall under any of the following categories qualify.

Recipients of Aid to Families with Dependent Children (AFDC / TCA)
Individual must have received this benefit, for any 9 months within the most recent 18 months, ending on the hiring date.

Veterans
Must be a person who has served on active duty in the U.S. Armed Forces for a period of more than 180 days, or was discharged or released from active duty for a service-connected disability, and a member of a family that received food stamps for a period of 3 months during the most recent 15 months ending on the hiring date.

Disabled Veterans are those who receive compensation for a service-connected disability and Have a hiring date which is not more than one year after having been discharged or released from active duty in the Armed Forces of the United States; or have aggregate periods of unemployment during the one-year period ending on the hiring date equal to or exceeding six months. The amount of qualified wages for this group only is increased from $6,000 to $12,000

Ex-Felons
Must be a person convicted of a felony under any Federal or state law, and must meet the following qualifications - Hired date not more than one year after the conviction or release from prison for that felony.

Designated Community Resident (DCR)
Must have attained age 18 but not yet be 40 on the hiring date
His/Her principal place of abode must be within an Empowerment Zone (EZ), Renewal Community(RC) or Rural Renewal County (RRC).

Vocational Rehabilitation Referral
Must be a person having a disability which results in s substantial barrier to employment, and must have been referred to an employer after completing or while receiving rehabilitation services according to an individualized written rehabilitation plan under the state plan for vocational rehabilitation services or vocational rehabilitation program for veterans.

Summer Youth
Must be a person who performs work for the employer between May 1st and September 15th AND meets all of the following qualifications. Between the ages of 16 and 17 on the hiring date (or by May 1st of the year involved) or has not worked for the employer before, AND lives within a Federal Empowerment Zone or Enterprise Community.

Food Stamp Recipient
Must be a person who is at least 18 but not yet 40 years of age AND
Must be a member of a family receiving assistance under a food stamp program for the 6 months ending on the hiring date OR that received food stamp for at least 3 months of the last 5 months ending on the hiring date, but is no longer receiving them.

Supplemental Security Income (SSI) Recipient
Must be a person receiving SSI benefits for any month during the 60 days preceding the date of hire.

For further details on these categories, see instructions for IRS Pre-Screening & Certification Request form. Contact the Tax Credit Program Unit at 410-767-2080 or 2047.

Where to go for more information:
Department of Labor, Licensing and Regulation (DLLR)
Belinda Duncan
Tax Credit Program Administrator
1100 N. Eutaw Street, Room 201
Baltimore, MD 21201
Telephone: 410-767-2047
Fax 410-767-2078