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IRS Provides Employers Three Additional Months to Claim Work Opportunity Tax Credit

June 21st, 2016 by ldaugherty

On June 17, 2016, the IRS issued Notice 2016-40 which provides additional transition relief to eligible employers who want to claim the Work Opportunity Tax Credit (WOTC). Employers now have until September 28, 2016 to file the necessary forms to claim the credit for eligible employees hired from January 1, 2015 through August 31, 2016.

For those not familiar with the WOTC, it is a program that allows employers who hire members of certain targeted groups (e.g., food stamp (SNAP) recipients, unemployed or disabled Veterans, Temporary Assistance for Needy Families (TANF) recipients, etc.) to receive a federal income tax credit equal to a percentage of the qualified employee’s wages. Normally, an employer must complete the required WOTC forms on or before the day the individual is offered employment and submit the forms to the Designated Local Agency no later than 28 days after the individual begins work. However, under Notice 2016-22 issued in March 2016, the IRS provided transitional relief by extending the deadline to certify employees hired since January 1, 2015 to June 29, 2016. Notice 2016-40 extends this deadline to September 28, 2016.

Notice 2016-22 also provided that IRS Form 8850 and ETA Forms 9061 and 9062 were to be modified consistent with the guidance in Notice 2016-22. While the IRS completed its update of Form 8850 in March 2016, the updated ETA forms were not released until now. Since the IRS has encouraged employers to submit the IRS Form 8850 and ETA Forms 9061 or 9062 together to reduce burdens and the likelihood of processing delays, the additional extension was necessary.

Millions of dollars in tax credits go unclaimed each year, even though employers are hiring workers every day from the WOTC targeted groups. If your company is not currently claiming the WOTC, this extended transition relief provides another opportunity to look back at hiring and take advantage of this underutilized tax credit. Don’t miss out!

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