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.

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!

IRS Revises Form 8850

It is time to think about updating your Work Opportunity Tax Credit (WOTC) pre-screening documents.

The IRS’ latest revision to Form IRS 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit” is dated March 2015.  I do not notice any material changes to the form.

Keep alert for possible instructions from the IRS regarding deadlines for switching over.  In the past, the IRS has continued to allow the use of older versions of the form, although this can be problematic if the program’s eligibility criteria have changed.  In this case, however, there are no program changes reflected on the form.

Interestingly, the IRS issued this revision during a period when the WOTC program itself has not yet been reauthorized by Congress for 2015.

For my firm’s clients, we will be updating your screening materials in a manner convenient for you, as you continue to use your current stock of screening packets.

Opportunity Alert! IRS Notice 2015-13 Providing Transition Relief for Employers Submitting Late WOTC Applications

We have been waiting for this!

The IRS has released IRS Notice 2015-13, which provides transition relief given the late retroactive renewal of the Work Opportunity Tax Credit program in December 2014.

Notice 2015-13 waves the 28-day deadline for submitting IRS Form 8850 (the WOTC Pre-screen Notice) for qualifying employees hired in 2014.  The extended deadline for submitting the applications for affected employees is now April 30, 2015.  From the Notice:

Because [Tax Increase Prevention Act of 2014] extended the WOTC retroactively for 2014 for members of targeted groups, employers need additional time to comply with the requirements of § 51(d)(13)(A). Accordingly, a taxable employer that hired a member of a targeted group (as defined in §§ 51(d)(2) through (10)), or a qualified tax-exempt organization that hired a qualified veteran described in § 51(d)(3), on or after January 1, 2014, and before January 1, 2015, will be considered to have satisfied the requirements of § 51(d)(13)(A)(ii) if it submits the completed Form 8850 to the appropriate DLA to request certification not later than April 30, 2015.

A timely request for certification does not eliminate the need for the employer to receive a certification before claiming the credit.

What does this mean in practical terms?

    • Employers who were sitting on the fence in 2014 may now submit WOTC applications for employees hired in 2014.
    • Moreover, employers who were actively screening and submitting WOTC applications during 2014 — but who declined to submit one or more applications because the 28-day deadline had been missed — may now reconsider and submit those “late” applications.
    • All applications for employees hired in 2014 must be submitted on or before April 30, 2015.

NEW WOTC Forms, Electronic & FAX Filing and Transition Relief

Catching up with the VOW to Hire Heroes Act, which was signed by President Obama in November of last year, the Internal Revenue Service has issued an updated Form 8850 and some very important guidance.

Links for your convenience:  The new IRS Form 8850.  IRS 8850 Instructions.  IRS Notice 2012-13

Disconnected Youth: Although not unexpected, I should note that in preparing the updated IRS 8850 Pre-screening Notice, the IRS has removed the questions related to qualifying Disconnected Youth.  This category expired on December 31, 2010. 

We’ve been clinging to the hope that it would be added-back with the extension of WOTC.  I personally have not given up on that hope.  Also, if I am not mistaken, the Department of Labor’s current instructions to State Workforce Agencies still requires them to reserve disconnected youth applications on file pending future instructions.

Notice 2012-13: Notice 2012-13 provides guidance on a number of important issues and should not be overlooked.  I suggest a thorough reading.  Major topics covered include:

  • Background of the new veterans categories
  • Transition relief (a grace period extending the 28-day submission deadline for IRS 8850 for qualified veterans hired between November 22, 2011 and May 22, 2012)
  • The use of electronic signatures for IRS 8850
  • Signing or filing IRS 8850 by FAX transmission
  • Guidance for tax-exempt organizations claiming WOTC

Request for Comments: In addition to the guidance provided by the IRS on these topics, the IRS is also requesting comments about (1) alternative methods for certification of qualified veterans and (2)alternative methods of filing Form 8850.

In summary, with this notice the IRS has given us a lot to think about and a lot of work to do. 

Final Guidance about Disconnected Youth and Unemployed Veteran WOTC Groups

I have wanted to write about this for a couple of weeks now, but as you know if you follow the news, there has been a lot going on. 

On March 5, 2010 the U.S. Department of Labor’s Employment and Training Administration issued Training and Employment Guidance Letter NO. 3-09 Change 2.  (I’m not complaining, but even the names of these documents are complicated.) 

This “TEGL” deals with issues that are critically important for employers who participate in the Work Opportunity Tax Credit (WOTC) program.  I’ll highlight the most pressing here.  If you want all the details, you can download the TEGL yourself by clicking here.

Use the August 2009 Form IRS 8850. First, this TEGL sets a deadline for requiring the use of the newest (August 2009) version of Form IRS 8850 – “Pre-Screening Notice and Certification Request for the Work Opportunity Credit.”  In a nut shell, use it now.  But there is some leeway allowed.

For the two newest target groups of Disconnected Youth and Unemployed Veterans, all submissions as of October 17, 2009 must use the August 2009 form.  I have found that the California WOTC unit will still accept timely applications using older versions, but will not issue a certification unless an August 2009 form is also submitted.

Please note that this absolute requirement applies only to applications under the Disconnected Youth and Unemployed Veteran target groups.  Submissions for other target groups using the June 2007 and May 2009 forms are still accepted.

Official Form for Disconnected Youth Self-Attestation.  Beginning 90 days from the publication date of this TEGL (I believe 90 days will expire on June 3, 2010), WOTC units can only accept a self-attestation from Disconnected Youth if the attestation is made with the DOL’s official ‘Youth Attestation Form.”  Until that date, home-made versions are still acceptable, as long as they meet statutory requirements.

In response to these rules, my team is now distibuting updated survey packets to all of our WOTC services clients.

If you have any questions at all about these developments, please feel welcome to contact me directly.  You can reach me at 800-655-5281, ext 101.  Or send me an e-mail at vah@WOTCPlanet.com. I will also welcome your call or correspondence.