IRS Provides Relief for Work Opportunity Tax Credit

The Internal Revenue Service has issued a notice providing guidance and transition relief for employers claiming the Work Opportunity Tax Credit.

According to Notice 2016-22, the Protecting Americans from Tax Hikes Act of 2015, the tax extenders legislation also known as the PATH Act that Congress passed last December, amended the Tax Code to extend the WOTC through Dec. 31, 2019. The PATH Act also amended the Tax Code to expand the “targeted groups” of individuals, the employment of whom may qualify the employer for a credit listed in the statute, to include qualified long-term unemployment recipients.

The notice provides guidance and transition relief beyond the 28-day deadline in the Tax Code for employers that hire members of targeted groups (other than qualified long-term unemployment recipients) on or after Jan. 1, 2015, and on or before May 31, 2016.

The PATH Act’s amendment and expansion of the targeted groups to include long-term unemployment recipients will require changes to forms used by employers to request certification for qualified long - term unemployment recipients hired on or after Jan. 1, 2016. A qualified long-term unemployment recipient is any individual who on the day before he or she begins working for the employer, or, if earlier, the day the individual completes the IRS Form 8850 as a prescreening notice in accordance with the certification described in the Tax Code, is in a period of unemployment that is (i) not less than 27 consecutive weeks, and (ii) includes a period (which may be less than 27 weeks) in which the individual received unemployment compensation under state or federal law.

The IRS Form 8850 and ETA Forms 9061 and 9062 are being modified so they can be used to request certification by the designated local agency for qualified long-term unemployment recipients. Those modified forms and instructions will indicate the information that must be provided on the forms for the employer to receive certification from the agency that the individual is a qualified long-term unemployment recipient. The Treasury Department and the IRS anticipate 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 or periods during which the individual was unemployed and the period the individual received unemployment compensation.