How to File Form 8850 for the WOTC Tax Credit

The Work Opportunity Tax Credit (WOTC) is a federal incentive that reduces an employer’s federal income tax liability for hiring individuals from groups facing employment barriers. The primary step is using IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. This form pre-screens a potential employee and requests certification from a state workforce agency that the new hire is a member of a WOTC-targeted group. Filing this form correctly and on time is required to claim the credit.

Identifying WOTC Target Groups

To leverage the WOTC, an employer’s new hire must belong to a designated target group. These groups include:

• Qualified IV-A Recipient: A member of a family receiving Temporary Assistance for Needy Families (TANF) for nine months during the 18-month period ending on the hiring date.
• Qualified Veteran: A veteran from a family receiving SNAP benefits, entitled to compensation for a service-connected disability, or unemployed for at least four weeks.
• Qualified Ex-Felon: An individual convicted of a felony and hired within one year of their conviction or release from prison.
• Designated Community Resident: An individual aged 18 to 39 living in a designated Empowerment Zone or Rural Renewal County.
• Vocational Rehabilitation Referral: An individual with a disability referred to the employer from rehabilitation services.
• Supplemental Security Income (SSI) Recipient: An individual who received SSI benefits within 60 days of the hiring date.
• SNAP Benefit Recipient: A qualified individual from a family receiving SNAP benefits.
• Long-Term Unemployment Recipient: An individual unemployed for at least 27 consecutive weeks who received unemployment benefits.

Completing Form 8850

The current version of Form 8850 should be downloaded from the IRS website. The employer enters their name, address, and employer identification number (EIN), while the employee provides their name, address, social security number, and date of birth. This information is collected on or before a job offer is made.

The core of the form is a series of yes-or-no questions the applicant must answer and sign. These questions correspond to the WOTC target groups, and the applicant must complete this section first.

After the applicant finishes, the employer adds the employee’s start date and the date the information was provided. The employer then checks the relevant target group box and signs the form. Completing the form is a voluntary program for the applicant.

Submitting the Form for Certification

Once completed and signed, Form 8850 is not sent to the IRS. It must be submitted to the designated State Workforce Agency (SWA) by mail or an online portal. Employers can find the correct SWA on the Department of Labor’s website.

The submission deadline is 28 calendar days after the new hire’s start date. Within this timeframe, the employer must submit Form 8850 with either ETA Form 9061 or ETA Form 9062. This 28-day rule is strictly enforced, and failure to meet it results in denial of the certification. The SWA then reviews the application and, if verified, issues a formal certification to the employer.

Claiming the Tax Credit

Receiving certification from the SWA is the final step before an employer can claim the WOTC, and this document is a required tax record. The credit’s value varies from $1,200 to $9,600 per hire, depending on the target group and hours worked.

For-profit employers calculate the credit using IRS Form 5884. The credit is 40% of the first $6,000 in wages for an employee working at least 400 hours, and 25% for one working 120 to 400 hours. The maximum credit applies to certain qualified veterans.

The total WOTC is reported on Form 3800, General Business Credit, which is filed with the employer’s annual tax return. Tax-exempt organizations hiring qualified veterans use Form 5884-C to claim the credit against payroll taxes.