The IRS recently issued transition relief for certain employers administering the Work Opportunity Tax Credit (WOTC) program.
IRS Notice 2021-43 extends the typical 28-day time frame for submitting a certification request to a designated State Workforce Agency (SWA). Employees hired between January 1 and October 8 of 2021 are now able to submit WOTC requests, so long as the credit being requested is for a member of the Designated Community Resident or Qualified Summer Youth Employee target groups.
In other words, employers that apply for Designated Community Resident or Qualified Summer Youth Employee tax credits have significantly more time to submit the request and necessary documentation.
Individuals of the Designated Community Resident target group can earn employers up to $2,400 in WOTC; members of the Qualified Summer Youth Employee target group can earn employers up to $1,200 in WOTC.
In addition, the IRS notice addresses the fact that many employers may have received denial letters regarding certifications during this time and as result is providing transition relief. The Notice says, “To be eligible for the relief provided by this notice, an employer that submitted Form 8850 to the DLA and subsequently received a denial letter from the DLA due to the expiration of the Empowerment Zone designations must re-submit the completed Form 8850 by the date set forth in section IV.A of this notice.”
Employers that submitted the necessary Form 8850 to the designated SWA and haven’t heard back yet do not need to re-submit the application to be eligible for transition relief.
Finally, employers submitting WOTC requests for both Designated Community Residents and Qualified Summer Youth Employees who begin work between January 1 and October 8 must submit the applicable Form 8850 by November 8, 2021, at the latest.
Employees hired on or after October 9, 2021, will not be eligible for the transition relief outlined in the IRS notice.
If you are not currently administering a WOTC program, you should reconsider, as the program was recently renewed and extended through 2025. Certain target groups can generate up to $9,600 per WOTC certification.
WOTC is simple in concept. The program incentivizes employers to hire individuals from certain groups that historically face barriers to finding employment. We can help you get started with a WOTC program as soon as today with our TaxAdvantage® solution.
TaxAdvantage handles all of the paperwork requirements, provides guidance on best practices for applying for tax credits, screens individuals online and via telephone to verify eligibility, and maximizes potential earnings by ensuring all new hires are properly vetted for WOTC qualification. Download our TaxAdvantage product flyer to learn more.
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