What Is the Work Opportunity Tax Credit Questionnaire?

The Work Opportunity Tax Credit (WOTC) is a federal tax credit encouraging employers to hire individuals from target groups facing employment barriers. A key step in determining eligibility involves completing a specific questionnaire. This process helps employers identify potential tax savings.

Understanding the Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a federal incentive for businesses to hire individuals from designated groups facing employment challenges. Its objective is to facilitate their entry into the workforce, fostering economic opportunity and reducing reliance on government assistance. The credit is available to both taxable and certain tax-exempt employers across the United States.

There are ten target groups whose members may qualify an employer for the WOTC. These include qualified veterans, long-term unemployment recipients, and individuals receiving Supplemental Nutrition Assistance Program (SNAP) benefits. Other groups are Supplemental Security Income (SSI) recipients, ex-felons, and those referred through vocational rehabilitation programs. The WOTC also applies to summer youth employees, Designated Community Residents (DCRs), and recipients of Temporary Assistance for Needy Families (TANF).

The credit amount varies based on the target group and wages paid during the employee’s first year. For most groups, the credit is 40% of up to $6,000 in qualified first-year wages, yielding a maximum of $2,400 per eligible employee, provided they work at least 400 hours. If an employee works at least 120 hours but fewer than 400, the credit is 25% of qualified wages. For certain qualified veterans, the credit can reach up to $9,600, calculated on up to $24,000 in wages.

The Purpose of the Questionnaire

The Work Opportunity Tax Credit Questionnaire is formally known as IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. This form is the initial step in the WOTC application process. Its purpose is to pre-screen prospective employees to determine if they belong to a WOTC target group.

Employers administer this questionnaire to job applicants on or before the day a job offer is extended, or at the latest, before the employee’s first day of work. Accurate completion of this document is paramount, as it establishes preliminary eligibility for the tax credit. This screening helps employers identify credit opportunities and ensures compliance with federal guidelines.

Completing the Questionnaire

To complete the Work Opportunity Tax Credit questionnaire, employers should obtain IRS Form 8850 from the IRS website, IRS.gov/Form8850. This form is divided into sections, requiring input from both the job applicant and the employer. The applicant completes Part I, which includes personal details like their name, Social Security Number, and address.

Part I contains questions to determine if the applicant meets WOTC target group criteria, inquiring about military service, public assistance, or unemployment history. The applicant must truthfully answer these questions and sign and date the form on or before the job offer date. After the applicant’s completion, the employer fills out Part II of Form 8850, providing business information like its name, Employer Identification Number (EIN), employee start date, and job title.

The employer indicates which target group the applicant appears to qualify under based on the information provided. Errors or omissions could delay or disqualify the credit. Both the employer and the applicant must sign the form by the submission deadline.

Submitting the Questionnaire and Subsequent Steps

After IRS Form 8850 is completed, employers must submit it, along with either IRS Form 9061 (Individual Characteristics Form) or IRS Form 9062 (Conditional Certification Form), to the relevant State Workforce Agency (SWA). These forms are not submitted directly to the Internal Revenue Service (IRS).

The deadline for submission is generally within 28 calendar days from the new hire’s first day of work. Failure to meet this deadline results in forfeiture of the tax credit for that employee. Submission methods include mail or, in many states, an online portal provided by the SWA.

Once the SWA receives the forms, they review the documentation to certify if the employee is a member of a WOTC target group. If approved, the SWA issues a certification letter to the employer. This certification is the official confirmation allowing the employer to claim the WOTC. Employers then calculate the credit using IRS Form 5884, Work Opportunity Credit, and claim it on their federal income tax return. Tax-exempt organizations claim the credit against their payroll taxes using IRS Form 5884-C for qualified veterans.