Work Opportunity Tax Credit (WOTC)
The Work Opportunity Tax Credit (WOTC) reduces an employer’s cost of doing business, while helping those most in need gain valuable work experience.
The credit provides tax savings to employers who hire people from certain target groups, including welfare recipients, veterans, youth and ex-felons.
In the end, WOTC helps increase America’s economic growth and productivity.
To obtain forms and information:
Download the Pre-Screening Notice, IRS Form 8850 (2 pages), 8850-Instructions (4 pages), the Work Opportunity Credit form, IRS Form 5884 (3 pages), the Individual Characteristics Form, ETA 9061| ETA 9061 en Español, or the new Disconnected Youth Self-Attestation Form
Forms can also be obtained at the local IDES Office / Illinois workNet Center, or by calling 312-793-2913. To find your local office, please call 1-888-367-4382. Additionally, the IRS can be contacted at 800-829-3676.
Note (2/1/07): The Welfare-to-Work and Work Opportunity Tax Credit programs were reauthorized on 12/21/06, for periods beginning 01/01/06. For a status update, check with your local IDES office or revisit this Web page.
For a comprehensive overview of the Work Opportunity Tax Program please click here.
The Amount of Credit
The credit amount depends on which WOTC target group a new hire qualifies into and the number of hours a new hire works. For example, the maximum tax credit for short-term welfare recipients, qualified veterans and ex-felons is $2,400 per hire. But the maximum credit is $4,800 for a disabled veteran and $9,000 over a two-year period for long-term welfare recipients.
The WOTC Target Groups
- Families receiving Temporary Assistance for Needy Families (TANF)
- Qualified Veterans
- Ex-felons
- Designated Community Residents:
- Vocational Rehabilitation Referrals
- Summer Youth Employees
- Food Stamp Recipients (Supplemental Nutrition Assistance Program - SNAP)
- SSI Recipients
- Long-term Family Assistance Recipients
- Hurricane Katrina
- Unemployed Veterans
- Disconnected Youth
Applying for the WOTC Certification Takes 3 Simple Steps
Employers must apply for and receive certification from the Illinois Department of Employment Security. Once certified and the minimum work hours are met, the employer can claim the tax credit on their federal tax return (IRS Form 5884, Work Opportunity Credit).
Step 1. Prescreen potential employees using IRS Form 8850, “Pre-Screening Notice & Certification Request for Work Opportunity Credit.” Complete and sign the back of the form.
Step 2. Complete the ETA Form 9061, “Individual Characteristics Form.”
Step 3. Mail the original signed forms to IDES’ WOTC Unit no later than 28 calendar days after the new hire’s start date, at the address below:
IDES - WOTC Unit
Attn: John Waters
33 South State Street, 8th Floor
Chicago, IL 60603
Note: Please keep a copy of these forms with your IRS records.
The WOTC Tax Credit Benefits
The Work Opportunity Tax Credit saves employers money and requires little paperwork. Helping those most in need find and retain jobs and gain on-the-job experience benefits all employers and increases America’s economic growth and productivity.
Who Does Not Qualify?
• Relatives working for the employer
• Individuals who worked for the employer before and were not WOTC-certified. Such individuals must be rehired within one year of the original start date.
• Employees receiving federally subsidized on-the-job training. However, the time accumulated during training can be considered part of the employment period.
Illinois State Tax Credit for Hiring Ex-Offenders
Tax Credit of up to $600.00
For each taxable year beginning on or after January 1, 2007, each taxpayer is entitled to a credit in an amount equal to 5% of qualified wages paid by the taxpayer during the taxable year to one or more Illinois residents who are qualified ex-offenders. The total credit allowed to a taxpayer with respect to each qualified ex-offender may not exceed $600 for all taxable years. For more information please see Section 216 of the Illinois tax code or click here.
Illinois State Tax Credit for Hiring Qualified Veterans
Tax Credit of up to $600.00
Beginning in tax year 2007, Illinois employers can earn tax credits for hiring veterans who have recently been on active duty overseas. Employers can earn the new Veteran’s Tax Credit of 5 percent of total wages paid, up to a maximum of $600 annually, for wages paid to each veteran hired after January 1, 2007. The veteran must work at least 185 days during the tax year for the employer to qualify. The credit is available for veterans who were members of the Armed Forces, the Armed Force reserves, or the Illinois National Guard on active duty in Operation Desert Storm, Operation Enduring Freedom, or Operation Iraqi Freedom. For more information please see Section 216 of the Illinois tax code or click here.