What Is Form 8850 for the Work Opportunity Tax Credit?
Learn how Form 8850 functions as the required pre-screening tool for employers to determine a new hire's eligibility for the Work Opportunity Tax Credit.
Form 8850, the “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” is a document used by employers to pre-screen new hires. The form is the initial step to determine if an employee belongs to a group that qualifies the employer for the Work Opportunity Tax Credit (WOTC). Completing and submitting this form is a prerequisite for claiming the WOTC on a federal tax return.
The Work Opportunity Tax Credit
The WOTC is a federal tax credit that incentivizes employers to hire individuals from targeted groups facing employment barriers. The credit amount ranges from $1,200 to $9,600 per employee. It is calculated as 40% of the first $6,000 in wages, for a maximum of $2,400, for an employee who works at least 400 hours, or 25% for those working 120 to 400 hours.
Targeted groups for the WOTC program include:
- Qualified veterans, which can include those who are unemployed or disabled.
- Qualified ex-felons hired within a year of their conviction or release from prison.
- Individuals living in specific economically distressed areas, known as Designated Community Residents or living within an Empowerment Zone.
- Recipients of Supplemental Nutrition Assistance Program (SNAP) benefits.
- Families receiving Temporary Assistance for Needy Families (TANF).
- Individuals who have experienced long-term unemployment.
- Participants in a vocational rehabilitation program.
Completing Form 8850
Employers must gather information for the form, including the business name, Employer Identification Number (EIN), and address. It also requires the employee’s full name, Social Security number, address, official start date, and date of birth.
The core of Form 8850 is a series of yes-or-no questions that the new employee must answer and sign on or before the day a job offer is made. The questions ask about military service, past felony convictions, or receipt of government aid to identify potential eligibility. The employee’s signature attests to the truthfulness of their answers.
In addition to Form 8850, employers must complete the Department of Labor’s ETA Form 9061, the Individual Characteristics Form. If the applicant is a qualified long-term unemployment recipient, employers must also have them complete ETA Form 9175.
How to Submit Form 8850
Once completed and signed, Form 8850 and any other required documents must be submitted to the State Workforce Agency (SWA) in the state where the employee will work. These forms are not sent to the IRS.
The completed Form 8850 must be sent to the SWA no later than the 28th calendar day after the employee’s start date. This 28-day window is a firm requirement, and failing to meet it will generally result in the denial of the tax credit for that employee.
After the SWA receives the application, it reviews the information to verify the employee’s eligibility. If confirmed, the SWA issues a formal certification to the employer. This certification permits them to claim the WOTC on their federal income tax return using Form 5884, Work Opportunity Credit.