Work Opportunity Tax Credit (WOTC)
Explore the Work Opportunity Tax Credit to maximize tax savings by hiring eligible individuals.
Overview
Per the IRS, The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire and retain qualified veterans and other individuals from target groups that historically have faced barriers in securing employment.
As of 2020, most target groups have a maximum credit of $2,400 per eligible new hire, but some may be higher. Hiring certain qualified veterans, for instance, may result in a credit of $9,600 per eligible new hire.
WOTC Targeted Groups include (see Appendix to get details on each group):
- Qualified IV-A Recipient
- Qualified Veteran
- Qualified Ex-Felon
- Designated Community Resident (DCR)
- Vocational Rehabilitation Referral
- Qualified Summer Youth Employee
- Qualified Supplemental Nutrition Assistance Program (SNAP) Benefits Recipient
- Qualified Supplemental Security Income (SSI) Recipient
- Long-Term Family Assistance Recipient
- Qualified Long-Term Unemployment Recipient
How WOTC Works
Who qualifies for the Work Opportunity Tax Credit?
Employers may qualify for the WOTC if they hire an individual who is a member of one of the target groups determined by the IRS to have historically faced barriers to employment.
Any business, regardless of size or industry, may be eligible to claim tax credits under the WOTC program. And because there’s no limit to the number of individuals employers can hire as part of the program, there’s also no cap on the number of credits they can claim.
Note: WOTC-certified employees must work at least 120 hours during the first year of employment for an employer to claim credits.
Work Opportunity Tax Credit certification and screening process
Before employers can claim a Work Opportunity Tax Credit, they must first receive certification from a State Workforce Agency (SWA) that the new hire meets the qualifications of one of the target groups. This is done using IRS Form 8850 [instructions] and one of two forms from the Department of Labor (ETA Form 9061 OR ETA Form 9062). These forms have to be filed within 28 calendar days after the new hire's start date:
- Form 8850 is a pre-screen used to make a written request to the company’s state workforce agency (SWA) to certify an individual as a member of a targeted group for purposes of qualifying for the work opportunity credit.
- The applicant must complete the first page (WOTC questionnaire) on or before the day of the job offer. It outlines the conditions someone from one of the target groups must meet to qualify for the program.
- The second page is intended for employers. On it, they will provide their business contact information and the applicant’s key employment-related dates.
- ETA Form 9061, or the Individual Characteristics Form (ICF), provides specific information about how an applicant answered the WOTC questionnaire.
- The employee must complete this form and have it verified by the employer.
- Either the new hire or employer must sign and date the form. If the new hire is under age 18 on the hire date, a parent or guardian must sign and date the form.
- ETA Form 9062, is the Conditional Certification Form for applicants who have been pre-screened for WOTC by an SWA.
- An individual may present this form during the interview process or when hired. This form indicates the individual was tentatively determined as eligible for a WOTC target group.
- The employer must hire the individual by the date indicated in Question 15 in order to possibly be qualified for a tax credit.
- The employer must complete Part II of the form.
- The employer must make sure the individual has signed the form.
If the employer is a Partnership, S-corporation, cooperative, estate, or trust, they must file Form 5884 [instructions] at year-end to claim the credit. All other taxpayers can instead report this credit at year-end directly on Form 3800 [instructions].
Note: If the employer is a qualified tax-exempt organization claiming a credit for hiring qualified veterans, they must file Form 5884-C instead of Form 5884. For tax-exempt employers, the credit is claimed on the employer portion of Social Security taxes using form 5884-C and should be filed after Form 941 is filed by Check.
Check Support
Check does not handle the work associated with claiming WOTC credits as this credit is claimed against a company’s business income taxes and not against payroll taxes.
This, however, does not mean that our partners cannot support WOTC. See our partner support guide section on how our partners can help their employers claim WOTC credits.
Check is also happy to help with any questions around this process or with connecting you to a Check preferred WOTC partner (see WOTC Partners section)
Partner Support Guide
Employers should follow these instructions to claim WOTC:
- Employers must already employ workers who are eligible for work opportunity tax credits.
- If the employer does not have any WOTC-eligible workers, they can contact the SWA or local unemployment office for a list of WOTC-eligible job applicants.
- Screen eligible workers
- Have workers complete the questionnaire on the first page of Form 8850, on or before the job offer date to see if they qualify for one of the WOTC target groups.
- File documents
- Submit the completed Form 8850 and either ETA Form 9061 or 9062 to the SWA within 28 days of the eligible new hire’s start date.
- Monitor hours worked and qualified wages paid
- WOTC-certified employees must work at least 120 hours during the first year of employment for an employer to claim credits, which are calculated as a percentage of qualified wages. Employees in the TANF recipient category must work 400 hours.
- Claim the tax credit
- Use IRS Form 5884 or 5884-C when filing annual tax returns to claim the WOTC.
- Keep accurate records
- Make copies of all the forms and supporting documents submitted to SWAs and correctly track employee hours in case the IRS decides to audit the credits claimed.
WOTC Partners
A WOTC partner is responsible for streamlining processes such as guiding employees through Form 8850, helping gather additional required documents, helping keep track of WOTC hours worked and guiding the employer through filing Form 5884 or Form 5884-C. Most WOTC partners will take a percentage commission for every employee’s work opportunity tax credit only after an employee's tax credit has been certified and returned to the employer. This commission ranges between 15-20% of the employee’s total tax credit and the certifications are found in the employer’s dashboard that the WOTC partner sets up for them.
If you are interested in this service, Check recommends HireTech. Please reach out to Check directly to learn more about WOTC partners or to get an introduction.
Resources
Appendix
Targeted Group | Definition |
Qualified IV-A Recipient | • A “qualified IV-A recipient” is an individual who is a member of a family receiving assistance under a state program funded under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any 9 months during the 18-month period ending on the hiring date. |
Qualified Veteran | • A “qualified veteran” is a veteran who is any of the following:
◦ A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date
◦ Unemployed for periods of time totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date
◦ Unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date
◦ Entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces or
◦ Entitled to compensation for a service-connected disability and unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date
◦ See IRS Notice 2012-13 for more detailed information. |
Qualified Ex-Felon | • A “qualified ex-felon” is a person hired within a year of:
◦ Being convicted of a felony or
◦ Being released from prison for the felony |
Designated Community Resident (DCR) | • A DCR is an individual who, on the hiring date:
◦ Is at least 18 years old and under 40 and
◦ Has a principal residence within one of the following:
▪ An Empowerment Zone (EZ) or
▪ A Rural Renewal County (RRC)
• When determining the credit, wages do not include wages paid or incurred for services performed while the individual's principal place of residence is outside an EZ or RRC. See the instructions to Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, for the current list of EZ and RRC designations. |
Vocational Rehabilitation Referral | • A “vocational rehabilitation referral” is a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services pursuant to:
◦ A state plan approved under the Rehabilitation Act of 1973
◦ An Employment Network Plan under the Ticket to Work program or
◦ A program carried out under the Department of Veteran Affairs |
Qualified Summer Youth Employee | • A “qualified summer youth employee” is one who:
◦ Is at least 16 years old, but under 18 on the hiring date or on May 1, whichever is later
◦ Only performs services for the employer between May 1 and September 15 (was not employed prior to May 1) and
◦ Resides in an Empowerment Zone (EZ) |
Qualified Supplemental Nutrition Assistance Program (SNAP) Benefits Recipient | • A “qualified SNAP benefits recipient” is an individual who on the hiring date is:
◦ At least 18 years old and under 40 and
◦ A member of a family that received SNAP benefits for:
▪ the previous 6 months or
▪ at least 3 of the previous 5 months |
Qualified Supplemental Security Income (SSI) Recipient | • A “qualified SSI recipient” is an individual who received SSI benefits for any month ending within the 60-day period that ends on the hire date. |
Long-Term Family Assistance Recipient | • A "long-term family assistance recipient" is an individual who, at the time of hiring, is a member of a family that meet one of the following conditions:
◦ Received assistance under an IV-A program for a minimum of the prior 18 consecutive months
◦ Received assistance under an IV-A program for a minimum 18-month period beginning after 8/5/1997 and it has not been more than 2 years since the end of the earliest of such 18-month period or
◦ Ceased to be eligible for assistance under an IV-A program because a federal or state law limited the maximum time those payments could be made, and it has been not more than 2 years since the cessation of such assistance |
Qualified Long-Term Unemployment Recipient | • A “qualified long-term unemployment recipient” is an individual who has been unemployed for not less than 27 consecutive weeks at the time of hiring and who received unemployment compensation during some or all of the unemployment period. |
Last updated on October 30, 2025