McDermott Introduces House Bill to Expand WOTC for Foster Youth

Jim McDermott, D of Washington

Jim McDermott, D of Washington

Democrat Representative from Washington State, Jim McDermott on September 8th introduced HR 5947, the Improved Employment Outcomes for Foster Youth Act of 2016.

This bill proposes to expand the Work Opportunity Tax Credit (WOTC) to include “foster care transition youth” as an 11th qualifying target group. These are individuals, not yet 27 years old, who have been in foster care after a certain age.

The maximum tax credit generated would be $2,400, similar to most other WOTC categories.

At this time, the bill is also supported by 5 additional House cosponsors, including: David G. Reichert (R-WA), Lloyd Doggett (D-TX),  Danny K. Davis (D-IL), Tom Reed (R-NY) and Karen Bass (D-CA).

Let’s Us Know! How Do You Handle Delayed WOTC Certifications?

Hello friends and readers, this is Vaughn Hromiko, here.  This post is meant as a question to employers and agents . . . and anyone involved with the Work Opportunity Tax Credit program.  I would love to hear from you.

The Question:  How do you (or your CPA, or your company, or others you have observed), handle the claiming of Work Opportunity Tax Credits for employees whose WOTC certifications are delayed until after the tax-return filing deadline?

Perhaps you would:

  • Lump the employee’s credit into the following tax year?
  • Claim the tax credit by amending the employer’s return?
  • Something else?

You can post a response in the comments or you are welcome to respond privately by email to response@WOTCPlanet.com.  I won’t share identifying information about anyone who responds privately.

Background. This problem is destined to be more significant than ever for WOTC employees hired in 2015. State workforce agencies nationwide are experiencing extended delays in issuing Work Opportunity Tax Credit (WOTC) certifications for 2015 hires. This problem stems from Congress’ long delay in passing legislation to reauthorize WOTC after it expired in 2014.

The reauthorization bill, which was finally passed on December 18, 2015 also created a new WOTC Target Group, the “Long Term Unemployment Recipient”.  While this program expansion was welcomed, it placed new demands on state workforce agencies. They now have to update their procedures, databases and management software to handle the new eligibility criteria.

As soon as the bill passed, agencies knew this work would be required.  However, before any substantial planning or development could happen, they would need updated forms and specific guidance from both the IRS and Department of Labor.

The IRS issued an updated Form 8850 at the end of March, 2016. The updated ETA Form 9061 and related guidance were then finally issued on June 17, 2016.  It was only then, with all requirements finally defined, that agencies could make substantial headway in updating their systems.

Given the uncertainties created by this elongated series of updates, the IRS has given employers until September 28, 2016 to submit WOTC applications for their 2015 hires.  As of this late date in August, many agencies are still working to update their information systems and can not yet process the new WOTC target group.

Lay this schedule over the basic tax-return requirements for companies on a calendar-year filing schedule. Original tax-return filing dates passed months ago in March and April. Businesses and individuals that have requested a filing extension from the IRS will hit their final deadlines in mid-September and October.

Many WOTC certifications for 2015 hires will still be pending, even at that late date.

Deadlines Looming, WOTC Coalition Asks Treasury Department to Extend Transition Relief for 90 More Days

Paul Suplizio, President of the the Work Opportunity Tax Credit Coalition has authored an official letter to the Department of Treasury urging the Department to extend the time period granted for WOTC applications under Transition Relief.

IRS Notice 2016-22 provides Transition Relief for employers needing more time to process WOTC applications for employees hired in 2015 and early 2016.  This relief was necessary because of Congress’ long delay in reauthorizing the WOTC program after it expired on December 31, 2014.

Congress passed legislation on December 18, 2015 to reauthorize WOTC for 5 years, including retroactively 1 year to cover 2015.

Under the regular rules, employers face a 28-day deadline to submit a WOTC application for an employee who qualified at their time of hire. Transition Relief, as currently offered by the IRS, extends the application deadline to June 29, 2016 for all eligible employees hired from January 1, 2015 through May 31, 2016.  The WOTC Coalition is asking the Treasury Department to extend the June 29 deadline by another 90 days.

Why? WOTC employers still face a major problem.  The Department of Labor has not yet issued the revised application forms and the official guidance employers need in order to comply with the newest provision of the WOTC tax code.

State workforce agencies that receive the applications and issue certificates for qualifying employers also face challenges. Until the new forms and guidance are issued, they can not update the software systems and online webforms that support the application and certification process.  Agencies in many states are asking employers to delay submitting their applications until the updates and revisions can be made.

Even if the Department of Labor issued the anticipated forms and guidance today, many state workforce agencies would be hard pressed to complete their internal system updates in time for employers to submit all their WOTC applications before the June 29 deadline.

 

IRS Issues Revised Form 8850 – Includes WOTC Target Group J

irs8850_TOPThe IRS has issued a revision of IRS Form 8850 “Pre-Screening Notice and Certification Request for the Work Opportunity Credit.”  This revision was made necessary by the recent Protecting Americans from Tax Hikes Act of 2015 (PATH Act), which added a new target group to the WOTC program. The form now includes a question to screen for Long Term Unemployment Recipients.

Question number 7 at the bottom reads:

“Check here if you are in a period of unemployment that is at least 27 consecutive weeks and for all or part of that period you received unemployment compensation.”

The form’s instructions include guidance that defines the new target group:

Qualified long-term unemployment recipient. An individual hired after 2015 who on the day before the individual begins work for the employer, or, if earlier, the day the individual completes Form 8850 as a prescreening notice, is in a period of unemployment that: Is not less than 27 consecutive weeks, and Includes a period (which may be less than 27 consecutive weeks) in which the individual received unemployment compensation under state or federal law.

Please share this news with your friends and business associates!

Hire For a Second Chance Act of 2016 Would Increase WOTC Ex-Felon Tax Credit (and Make WOTC Permanent)

Representative Bonnie Watson Coleman of New Jersey has sponsored a bill to increase the amount of Work Opportunity Tax Credit generated by wages paid to qualifying ex-felons.  Her bill, known as the Hire for a Second Chance Act of 2016, would increase the maximum qualifying wage from the current $6,000 to $14,000.  As a result, the maximum tax credit amount that could be generated by hiring an ex-felon would increase from $2,400 to $5,600.

With little fanfare, Representative Coleman’s bill also proposes to delete Internal Revenue Code Section 51(C) paragraph 4, which currently reads:

“The term ‘wages’ shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 2019.”

In other words, this bill would make make WOTC permenant by deleting the expiration date from the code.

You can read her bill here.

Cosponsors to the bill include three other Democrats: Representatives Sheila Jackson Lee of Texas, Charles B. Rangel,  of New York, and Donald M. Payne, Jr. of New Jersey.

Edited 03/31/2016

Thank you Kentucky WOTC for Today’s Update

I received a system-generated update from the Kentucky Work Opportunity Tax Credit Office this morning.  If you have dealings with that office, perhaps you also received it.

It looks like the guidance provided in IRS Notice 2016-22 regarding the new WOTC Target Group (Long Term Unemployment Recipients) might be a little obsolete already.  Here’s the language I received this morning.

Notice the subject line says, “Waiting for IRS Guidance”.  Aren’t we all?

************** begin quote:
From: wotc.system@ky.gov
Sent: Wednesday, March 16, 2016 7:21 AM
Subject: Waiting for IRS Guidance

This is a message from Kentucky Work Opportunity Tax Credit office

Information Update:

03/15/2016

The U.S. Department of Labor, Employment and Training Administration, Office of Workforce Investment, Division of National Programs, Tools, and Technical Assistance has contacted us regrading WOTC and a meeting with IRS is planned to discuss precisely how the State Workforce Agencies are going to verify eligibility in the new Target Group – Long Term Unemployed  Recipient.  There has been a shift from the guidance IRS already published Notice 216-22 and what IRS seems to require in addition to the Self-Attestation Form.

Updated information on this target group will be provided as soon as we are informed.

***** end quote.

Thank you Kentucky!

IRS Notice 2016-22 – WOTC Transition Relief and Guidance

IRS Notice 2016-22 can now be found on the IRS website through a Google search.  Click the link to get your copy.

In a nut shell, for employees hired from January 1, 2015 through May 31, 2016 (inclusive), the usual 28-day application deadline has been extended through June 29, 2016.  That’s good.

Disappointedly, however, Notice 2016-22 does not provide definitive guidance about qualifying employees under the new Long Term Unemployment Recipient target group.  Rather, it defers this to the yet-to-be revised Form 8850 and ETA 9061.

“Those modified forms and instructions will indicate the information that must be provided on the forms for the employer to receive certification from the DLA that the individual is a qualified long-term unemployment recipient.”

“The Treasury Department and the IRS anticipate that the modified forms will include a requirement that the individual signing the form attest that he or she meets the requirements to be a qualified long-term unemployment recipient and a requirement that the individual attest to the period(s) during which the individual was unemployed and the period the individual received unemployment compensation.”

A few years ago, the IRS developed similar requirements for the Disconnected Youth target group (now discontinued).  To document an employee’s status as a disconnected youth, the employee signed a statement form provided by the Department of Labor.  I’m guessing there will be something similar promulgated for the Long Term Unemployment Recipient group.

WOTC Transition Relief and Forms Update – Almost There

Paul Suplizio, President of the Work Opportunity Tax Credit Coalition, announced this morning that the IRS has released Notice 2016-22 providing for WOTC Transition Relief. I believe Paul but so far, I am unable to find the documents online.  Perhaps they’ll show up later today.

As soon as the nitty-gritty details come to light, you’ll be the first to know.

WOTC – Still Waiting for New Forms and Transition Relief

A few friends of the blog have contacted me recently, asking if the IRS has issued its notice on transition relief for the re-authorized WOTC program.  Not yet.  Nor has the Department of Labor or IRS issued revised forms for 2016 to reflect the new Long Term Unemployment Recipient target group.

Here’s to continued patience and hoping we see something soon….

Department of Labor Issues Interim WOTC Instructions for State Workforce Agencies

This week, the Department of Labor’s Employment and Training Administration issued new instructions to State Workforce Agencies (SWA’s). Agencies needed instructions in the wake of the WOTC re-authorization provided by the Protecting Americans From Tax Hikes (PATH) Act of 2015. President Obama signed this bill on December 18, 2015.

The document summarizes the program changes and other effects created by the PATH Act.  It also guides SWA’s on what to do with applications that were submitted timely (within 28 days from start of employment) in 2015 during the 49-week WOTC authorization lap.  As a result, employers nationwide should now begin receiving certifications for their 2015 qualifying hires.

While these instructions are important and helpful, we are still awaiting further guidance about WOTC’s newest target group, dubbed “Long Term Unemployment Recipients.”

Also, the IRS has not yet issued a notice about the much anticipated transition relief. In prior years, transition relief has temporarily waived the 28-day application deadline for WOTC applications not submitted timely during the program’s authorization lap. For example, last year we were able to submit applications for 2014 hires, without penalty, all the way through April 30, 2015.

While these instructions do not tell us how to qualify or document employees eligible under the new target group, it does inform us that the Department of Labor and IRS are busy modifying WOTC forms to include the new target group.

Furthermore, employers are “encouraged to postpone certification requests for the New Target Group until the revised forms are available.”  If we just can’t wait, the SWA’s will accept applications for the new target group if employers write “Long-term Unemployment Recipient in the top margin [of the ETA 9061 or 9062], right corner underneath the expiration date.”

You can read the entire document for yourself.

DOL PATH Act 2015 – WOTC Interim Instructions (1.27.16)

 

(Thank you to Paul Suplizio, President of the WOTC Coalition, for sending us a copy of the ETA’s interim instructions.)