A valuable tax remains available to businesses that hire long-term unemployment recipients and other groups of workers who are facing significant barriers to employment.
The Work Opportunity Tax Credit encourages employers to hire workers certified as members of any of 10 targeted groups facing barriers to employment. This includes millions of Americans who were unemployed for at least 27 consecutive weeks during the pandemic and collected either state or federal unemployment benefits for all or part of that time.
The WOTC is available for wages paid to certain individuals who begin work on or before Dec. 31, 2025, the IRS says.
The other targeted groups include certain veterans and recipients of various kinds of public assistance, among others. Specifically, the 10 groups are:
- Temporary Assistance for Needy Families (TANF) recipients,
- Unemployed veterans, including disabled veterans,
- Formerly incarcerated individuals,
- Designated community residents living in Empowerment Zones or Rural Renewal Counties,
- Vocational rehabilitation referrals,
- Summer youth employees living in Empowerment Zones,
- Supplemental Nutrition Assistance Program (SNAP) recipients,
- Supplemental Security Income (SSI) recipients,
- Long-term family assistance recipients and
- Long-term unemployment recipients.
To qualify for the credit, an employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency within 28 days after the eligible worker begins work. This form is not sent to the IRS.
Eligible businesses then claim the WOTC on their federal income tax return. The tax credit is based on the wages paid to eligible workers during the first year of employment. This is a one-time credit for each new hire and an employer cannot claim the WOTC for employees who are rehired.
The credit is first figured on Form 5884, Work Opportunity Credit, and then claimed on Form 3800, General Business Credit.
Though the credit is not available to tax-exempt organizations for most groups of new hires, a special rule allows them to claim the WOTC for hiring qualified veterans. These organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations Hiring Qualified Veterans.
Additionally, see the LB&I and SB/SE Joint Directive on the WOTC the IRS issued to help certain employers affected by extended delays in the WOTC certification process.
