
INSIGHTS FOR FINANCIAL INSTITUTIONS	MARCH 11, 2016

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Director of Financial Institutions
Gary Smith

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Claiming the Work Opportunity Tax Credit

On March 7, 2016, the IRS announced an extension of the time employers who want to claim the work opportunity tax credit (WOTC) have to file IRS Form 8850 for employees hired in 2015. 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 employer must also submit (suggested to be filed along with Form 8850) a Department of Labor Employment and Training Form 9061 (Individual Characteristics Form) or Form 9062 (Conditional Certification Form).

WOTC Extended Through 2019

The WOTC was one of the tax measures that had expired at the end of 2014. When the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was signed into law on December 18, 2015, extending the WOTC through December 31, 2019, it was not clear how employers who had hired someone from one of the targeted groups in 2015 would comply with Form 8850's 28-day filing requirement.

IRS Notice 2016-22 cleared up the 28-day filing requirement by providing additional time, until June 29, 2016, for an employer to submit Form 8850 to a designated local agency ("DLA") to obtain certification for eligible employees hired in 2015.

Targeted Groups for 2015

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

New Target Group for 2016

In addition to extending the WOTC through 2019, for taxable employers only, the PATH Act added "qualified long-term unemployment recipients" (i.e., those who have been unemployed for 27 weeks or more) to the list of targeted groups effective January 1, 2016.

To give the IRS and DOL time to update the necessary reporting forms and instructions, IRS Notice 2016-22 also extends, to no later than June 29, 2016, the time for submitting Form 8850 for members of targeted groups, including long-term unemployed individuals, hired in 2016, limited to those hired and beginning work prior to June 1, 2016. For WOTC qualified employees beginning work on or after June 1, 2016, the usual 28-day filing requirement applies.

Review Hiring Records

Employers need to receive certification from a DLA before claiming the WOTC. Consequently, banks that have not yet filed tax returns for 2015 should review their employment records to determine whether they hired someone in one of the targeted groups during 2015. While the transition relief provided in IRS Notice 2016-22 for claiming the WOTC may have come too late for some banks that have already filed their 2015 income tax returns, those banks should still review their records and consider whether the WOTC warrants the filing of a substitute or amended return for 2015. In light of the WOTC's extension through 2019, all banks should put in place a regular process to review new hires for membership in one of the target groups.

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

This publication is produced and published by Eide Bailly and distributed with the understanding that the information contained does not constitute legal, accounting or other professional advice. It is not intended to be responsive to any individual situation or concerns as the contents of the publication are intended for general informational purposes only. Readers are urged not to act upon the information contained in this publication without first consulting competent legal, accounting or other professional advice regarding implications of a particular factual situation. Questions and information for publication can be submitted to your Eide Bailly representative. To request reprints of this publication, send a written request to RequestReprints@eidebailly.com. Copyright Eide Bailly 2016.