Claim the Work Opportunity Credit (WOC) and save on hiring costs
A federal tax credit designed to incentivize hiring individuals from specific target groups facing significant barriers to employment.
Who can qualify?
- Veterans with service-connected disabilities or unemployed for a designated period.
- Temporary Assistance for Needy Families (TANF) Recipients currently receiving benefits.
- Supplemental Security Income (SSI) Recipients receiving income due to disability.
- Long-Term Unemployed Individuals unemployed for at least 27 weeks and are currently receiving unemployment benefits.
- Ex-Felons convicted of a felony and hired within a year of conviction or release from incarceration.
- Designated Community Residents residing in economically disadvantaged areas.
- Qualified Summer Youth Employees aged 16 or 17, working during the summer.
How to claim the credit
- Submit Form 8850: Request pre-screening notice and eligibility certificate of the employee for the WOC from your state workforce agency within 28 days of the employee’s start date.
- Certification: The state workforce agency reviews Form 8850 and, if the employee qualifies, issues certification for the Work Opportunity Credit.
- File Form 5884: Once certified, employers must complete and submit IRS Form 5884, with their annual tax return, detailing eligible employees and the credit claimed.
Credit calculation:
- It varies by target group and employment duration.
- It is a percentage of qualified wages paid during the first year of employment.
*Check for annual updates and legislative changes on percentages and maximum credit amounts.
Benefits of the Work Opportunity Credit:
- Reduce hiring costs: The WOC offers a tax credit to employers, reducing the cost of hiring individuals from specific groups, also making it affordable to employ those who may face barriers to employment.
- Support struggling communities: Encouraging businesses to hire, boosts the local economies by hiring from economically disadvantaged areas.
Important considerations:
- Employers must adhere to procedural requirements and timely submission to ensure eligibility.
- Employers can benefit from tax savings while contributing to workforce development and inclusion.