IRS Provides Guidance for Employers Claiming the Work Opportunity Tax Credit

by: Smith and Howard

April 1, 2016

Back to Resources

In March, the Internal Revenue Service (IRS) issued a notice providing guidance and transition relief for employers claiming the Work Opportunity Tax Credit.

When Congress approved the Protecting American from Tax Hikes (PATH) Act of 2016 last December, it included an extension of the Work Opportunity Tax Credit through 2019. This federal tax credit is available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. PATH extended the targeted group of individuals to include qualified long-term unemployment recipients.

The notice provides guidance and transition relief beyond the 28-day deadline in the Tax Code for employers that hire members of targeted groups except for qualified long-term employment recipients, on or after January 1, 2015, and on or before May 31, 2016.
Changes to must be made to the certification forms used by employers to include long-term unemployed recipients hired on or after January 1, 2016. The IRS Form 8850 must be completed by the individual on the day before he or she begins working for an employer, or, if earlier, the day the individual completes the IRS Form 8850 as a prescreening notice in accordance with the Tax Code. 

The IRS and the Treasury Department anticipate that the modified forms will require individuals signing the form to attest that they meet the requirements to be a qualified long-term unemployment recipient during the period or periods during which the individual was unemployed and the period the individual received unemployment compensation. The individual must have been in a period of unemployment that is: not less than 27 consecutive weeks and includes a period in which the individual received unemployment compensation under state or federal law.
ETA Forms 9061 and 9062 are also being modified so that they can be used to request certification by the designated local agency for qualified long-term unemployment recipients. These forms and instructions will include information that must be provided on the forms for the employer to receive certification from the agency that the individual is a qualified long-term unemployment recipient.

For more information, please contact your Smith and Howard tax professional.

How can we help?

If you have any questions and would like to connect with a team member please call 404-874-6244 or contact an advisor below.