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Work Opportunity Credit
A Potential Tax Break For Your Business
by
Eva Rosenberg, MBA, EA
Some jobs require highly skilled and
trained employees. No one else will do. But they're expensive to find and
to hire. Have you ever thought of looking to your local unemployment office
for people they have put through some excellent programs?
Often, you can find a gem of an employee, give someone a chance at a great
future - and save yourself a ton of money. Talk about WIN-WIN!
How, you ask? Well, many of the people coming through the unemployment
office and other special programs come with a special bonus to the employer,
a gift from the government. They let you take advantage qualify for a tax
break called the Work Opportunity Credit (WOC).
The WOC gives you a tax credit of up to $2,100 per employee if you hire
someone from one of seven target groups.
But beware regulations governing the WOC are complicated. This article
can only help you decide whether the WOC might be a possibility for your
business. If you decide to pursue the credit, a consultation with your
tax professional is highly recommended.
The credit
You can receive a credit of up to 35 percent of the first $6,000
paid to each full-time employee qualified for the WOC. The employee must
work for you for a minimum of 180 days and must complete at least 400 hours
of paid employment. For qualified summer youth employees, the credit is
35 percent of the first $3,000 paid to each youth. The value of these credits
will be applied when you file your federal tax return.
Target groups
The WOC applies only to employees who start to work for you
after September 30, 1996 and before January 1, 2002. Those employees must
also fall into one of these seven target groups.
1.
IV-A (Aid to Families with Dependent Children, AFDC) recipient.
The employee must be a member of a family that has received assistance
under a state plan for at least a nine-month period ending on the hiring
date.
2. Veteran.
Veterans qualify if they are a member of a family that has
received AFDC for at least nine of the 12 months before the hiring date,
or has received food stamp assistance for at least three of the 12 months
before the hiring date. Veterans must also have served on active duty in
the Armed Forces for more than 180 days or been discharged for a service-related
disability.
3. Ex-felon.
The ex-felon must have been convicted of a felony under a federal
law, and the hiring date must be no more than one year after the ex-felon's
release from prison. In addition, the ex-felon must be a member of a family
whose income is 70 percent or less of the lower living standard set by
the Bureau of Labor Statistics.
4. High-risk youth.
Youths must be between the ages of 18 and 25. They must also live
in one of nine government-designated empowerment zones or in one of 95
designated enterprise communities.
5. Vocational rehabilitation referral.
The employee must have a physical or mental disability and must
have been referred to the employer from a state- approved vocational rehabilitation
program.
6. Summer youth.
The youth must be 16 or 17 years of age, be employed by you for
a minimum of 20 days between May 1, 1997, and January 1, 2002, and complete
at least 120 hours of paid employment. Additionally, the youth must live
in a government-designated empowerment or enterprise zone.
7. Food stamp recipient.
The employee must be between the ages of 18 and 25 on the hiring
date and must be a member of a family receiving food stamps for at least
six months ending on the hiring date.
Getting credit
On or before the day that the employee begins work for you,
you must have a written certification of the employee's eligibility or
a pre-screening notice.
Written certification must come from a designated state employment agency.
For a pre-screening notice, employers must provide written information
supporting their contention that the prospective employee is a qualified
member of one of the target groups. The notice, along with a written request
for certification, must be submitted to the designated state employment
agency within 21 days of the employee's hiring date. Since the state agency
can reject your request for an employee's certification, it's in your best
interest to complete all the necessary paperwork before you hire the employee.
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Copyright © 1998-2001, Eva Rosenberg
Initially Printed 2000
Reprinted and Revised 3/24/01
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