Deadline Extended to Claim Work Opportunity Tax Credit

Last week, the IRS announced an extension of the time employers that want to claim the work opportunity tax credit (WOTC) have to file Form 8850 for employees hired in 2014. Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, is normally due no later than 28 days after an employee begins work.

The WOTC was one of the tax measures that had expired at the end of 2013. When the Tax Increase Prevention Act extended the WOTC for 2014 last December, it was not clear how employers who had hired a member of one of the targeted groups in 2014 would comply with Form 8850's 28-day filing requirement.

IRS Notice 2015-13 provides additional time, until April 30, 2015, for an employer to submit the form to a designated local agency (DLA) to obtain certification for eligible employees hired in 2014.

The WOTC is generally 40 percent of the first $6,000 of qualified wages, although actual credit amounts can vary by targeted group. Targeted groups include:  

• Qualified IV-A recipients
• Qualified veterans
• Qualified ex-felons
• Vocational rehabilitation referrals
• Qualified summer youth employees
• Designated community residents at least 18 years of age but under age 40
• Qualified food stamp recipients
• Qualified supplemental security income recipients
• Long-term temporary assistance recipients

Employers need to receive certification from a DLA before claiming the WOTC. Consequently, banks with tax returns due next month should review their employment records to determine whether they hired someone in one of the targeted groups during 2014. Banks that have already filed their 2014 income tax returns should still review their records and consider whether the WOTC warrants the filing of a substitute or amended return for 2014.

Please contact your local Eide Bailly tax professional if you have any questions about the WOTC or other issues affecting banks.