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.)

New WOTC Target Group – Long Term Unemployment Recipient

The recent re-authorization and expansion of the Work Opportunity Tax Credit (WOTC) includes a new WOTC target group.  Reading from the statute, a “Long-term Unemployment Recipient” is defined as an individual “being in a period of unemployment which— (A) is not less than 27 consecutive weeks, and (B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.’’

In plain English? To qualify, your new employee must (1) have been unemployed for at least the past 27 weeks; and (2) he or she must have received unemployment compensation at some point during that time period.

This new target group applies only to employees hired after December 31, 2015.  The IRS has not yet issued guidance or provided any further interpretation of the new law.  It’s not yet clear what if any documentation will be required to demonstrate an employee’s eligibility.

President Promptly Signs Government Funding and Tax Extenders Legislation – WOTC Survives through 2019

President Obama signed a huge tax and spending package into law on Friday following congressional votes that avoided a year-end showdown over the budget and ended legislative business until lawmakers return in 2016

Empowerment zones were reauthorized only through 2016.  Interestingly, however, the bill included a provision that expanded empowerment-zone benefits into some census tracts outside of actual zone boundaries.

It’s not yet clear to me if this empowerment-zone expansion will also affect WOTC’s Designated Community Resident target group.

Read about it in USA Today: “President Obama signs massive spending bill, tax measures into law.”

 

Extenders and Funding Bills Passed by House and Senate

The tax extenders and government funding legislation passed the House and Senate today and is now on its way to the President for his pen.  Of primary interest to WOTC Planet readers is the 5-year extension of the Work Opportunity Tax Credit (WOTC) with Vow to Hire Heroes Act.  These will become law upon receiving the President’s signature.

From USA Today, “Senate clears massive spending bill, tax measures“.

You can read the bill here, at least until they move the file.  For the WOTC extension and revision, scroll to page 38 of the PDF.

Under the 5-year extension, WOTC will be expanded to include a new target group, “Long Term Unemployment Recipients.”  Here’s the language from the bill:

The term ‘qualified long-term unemployment recipient’ means any individual who is certified by the designated local agency as being in a period of unemployment which is not less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law.

Based on this language alone (no IRS interpretation available yet), my understanding is that a new employee must be unemployed at the time of hire and the condition of unemployment must have existed for at least the last 27 weeks (which equals one week more than 6 months).  At some point during that 27-week period, the new hire must have received unemployment insurance compensation.

I won’t be surprised if the IRS interprets this to permit one or more short periods of inconsequential employment during the 27-week period (similar to the HIRE Act which required 60 consecutive days of unemployment but still allowed up to 40 hours of work during that period). BUT, that’s just me hoping out loud.

After the President signs this legislation, we anticipate the IRS will issue a notice providing transition relief for employers that did not file timely WOTC application during the program’s 12-month hiatus.