Work Opportunity Credit

1
Work Opportunity Credit

• Incentive for Businesses to Hire Individuals From
  Groups That Have a Particularly High Unemployment
  Rate or Other Special Employment Needs

2
What Are the Credit Requirements?

• Do not need to be a renewal community business
• Employee must be certified by state employment
  security agency (SESA) using Form 8850
• Employee must be a new hire who begins work
  before December 31, 2003
• Must reduce the amount of your salary and wage
  deduction by the amount of the credit
• Cannot use the same wages to obtain the Welfare
  to Work Credit or the Renewal Community
  Employment Credit

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Form 8850
4
What Are the Certification Procedures?

• To receive certification, the employer must
  either
• Receive the certification by the day the
  individual begins work, OR
• Do both of the following
• Complete IRS Form 8850 by the day the individual
  is offered a job and
• Submit the form to the SESA
• Youth may be pre-certified to shorten the
  process

5
Who Is a Targeted Group Employee?

• An employee certified by the state employment
  security agency (SESA) using Form 8850 as a
• Recipient of assistance under Temporary
  Assistance for Needy Families (TANF)
• Veteran
• Ex-felon
• High-risk youth
• Vocational rehabilitation referral
• Summer youth employee
• Food stamp recipient
• Supplemental security income (SSI) recipient

6
Who Is a High Risk Youth?

• Youth must be at least 18 years old an not older
  than 24 years old on the hiring date and must
  reside in the renewal community

7
Who Is a Summer Youth Employee?

• A youth who is at least 16 years old but not 18
  on the hiring date who resides in the renewal
  community and performs services for the employer
  in the summer between May 1 and September 15

8
What Are the Qualified First Year Wages?

• The qualified wages you pay or incur for a
  certified targeted group employee during the one
  year period beginning on the date the individual
  begins work
• The qualified wages must be subject to FUTA
• The qualified wages are limited to 6,.000 each
  tax year for each employee (3,000 for the summer
  youth employee)

9
What Are Not Qualified First Year Wages?

• Wages for employee who worked for you more than
  one year
• Wages for your relative or dependent
• Wages for a person you rehired, if he or she
  wasnt a targeted group employee when employed
  earlier
• Wages for someone who did not work for at least
  120 hours

10
How Much Is the Credit?
3,000 for a summer youth employee
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How Do I Claim the Credit?

• Use Form 5884 to claim this credit

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Need More Information?

• IRS Publication 954
• IRC 51
• Form 5884
• 1-800-829-1040
• www.irs.gov