March 2013

Tax Alert

THE WORK OPPORTUNITYTAX CREDIT

TAX BRIEF

TA X A L E R T

THE WORK OPPORTUNITY TAX CREDIT

RETROACTIVE EXTENSION AND TRANSIT IONAL RELIEF TO BENEFIT EMPLOYERS - ACT ION REQUIRED

Employers seeking to claim the federal Work Opportunity Tax Credit (“WOTC”) for quali-fied individuals hired during the 2012 tax year now have through April 29, 2013 to file the required documentation.

On January 3, 2013, the Ameri-can Taxpayer Relief Act of 2012 (“ATRA”) was enacted, which amended and retroactively ex-tended the WOTC for taxpayers hiring certain qualified employ-ees on or after January 1, 2012 through December 31, 2013. Prior to ATRA, eligibility for the WOTC was limited to employ-ers who hired certain qualified employees on or after January 1, 2012 through December 31, 2012, when the WOTC was scheduled to sunset by operation of law.

Since 1996, the WOTC was developed as a federal income tax credit program administered by the U.S. Department of Labor. It provides businesses with an incentive to hire and retain

individuals from certain targeted groups that have historically ex-perienced a high unemployment rate or other special employment needs. The program provides a dollar-for-dollar reduction of a taxpayer’s federal tax liability and helps job-seekers to move toward economic self-sufficiency. Gener-ally, businesses that hired indi-viduals from the following target-ed groups potentially generated federal tax credits ranging from $1,200 to $9,600 per qualified employee:

•Recipients of public assistance programs, such as the Tempo-rary Assistance to Needy Fami-lies (“TANF”) or food-stamps;

•U.S. Military Veterans;•Ex-Felons;•Residents of federally-desig-

nated economic development zones; and

•Certain at-risk youth

Notwithstanding the benefits of the program to employers and job-seekers alike, the WOTC expired on December 31, 2011, and was extended only for the hiring of qualified veterans under the VOW to Hire Heroes Act of 2011 (“VOW Act”).

TEMPORARY CHANGES TO THE WOTC REQUIREMENTS

IRS Notice 2013-14 – Retroactive Qualification and Filing Requirements

On March 9, 2013 the Internal Revenue Service (“IRS”) released IRS Notice 2013-14, which waives the 28-day deadline for submit-ting IRS Form 8850 and Form 9061 or 9062 for qualified em-ployees hired on or after January 1, 2012 through March 31, 2013.

1 | SingerLewak March 2013

The program provides a dollar-for-dollar reduction of a taxpayer’s federal tax

liability and helps job-seekers to move toward economic self-sufficiency

March 2013 SingerLewak | 2

Under the VOW Act (briefly mentioned above), all of the tar-geted groups expired on Decem-ber 31, 2011, with the exception of certain qualified veterans. Howev-er, ATRA retroactively extended application of the WOTC to these other targeted groups, thereby allowing employers who hired individuals on or after January 1, 2012 to seek relief and claim the WOTC.

Generally, to qualify for the WOTC, employers must file Form 8850 (Pre-Screening Notice and Certification Request for the WOTC) and supplemental Form ETA 9061 (Individual Character-istics Form) or Form ETA 9062 (Conditional Certification Form), with a State Workforce Agency (“SWA”) to seek certification that an employee meets the criteria

as a member of a targeted group. These forms must be completed and signed by the job applicant and the employer on or before the date an offer of employment is made. The Form and supplemen-tal documentation must be filed with the SWA no later than 28 days from the date of hire. Un-der the transitional rules, however, the extended deadline for sub-mitting all timely and retroactive applications for affected employees is now April 29, 2013.

Notwithstanding the extended deadline, application of the tran-sitional rules differs dependent on the targeted groups an employer seeks to qualify, as follows:

•The extension applies to all targeted groups, except quali-fied veterans hired on or after January 1, 2012 through March

31, 2013 (i.e., a period of 15 months);

•The extension for qualified veterans applies to those individ-uals hired on or after January 1, 2013 through March 31, 2013 (i.e., a period of 3 months).

The temporary extension can be beneficial for all employers that have not taken advantage of the WOTC credit for qualified employees hired within the last 15 months. SingerLewak can assist in completing the required forms, obtaining the certification for each qualified employee and calculating the federal tax credits available to your company.