WORK OPPORTUNITY CREDIT
IRS has released a draft of form 5884, Work Opportunity credit taxpayer to claim this tax credit, which is scheduled to expire for employees who begin work after 2011. For many taxpayers, information previously reported on the form would now be reported directy on Form 3800 General Business Credit.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation At of 2010 extended Code Sec. 51 work opportunity tax credit four months to include individuals who began work before Jan 1, 2012. Under pre-Act law, wages for purposes of the credit didn't include any amount paid or incurred for an individual who began work after Aug. 31, 2011.
The credit allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of the first-year wages up to $6,000 per employee($12,000 for qualified veterans; and $3,000 for qualified summer youth employees). Where the employee is a long-term family assistance (LTFA) recipient the credit is a percentage of the first and second year wages, up to $10,000 per employee. Generally, the percentage of qualifying wages is 40% of the first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. For LTFA recipients, it includes an additional 50% of qualified second-year wages.
The targeted groups are:
As noted above, the work opportnuity tax credit is scheduled to expire for employees who begin work after 2011. In addition, the renewal community designations expired at the end of 2009. Wages paid or incurred for services performed after 2009 by a designated community resident or summer youth employee who lived in a renewal community may no longer qualitfy for the work opportunity tax credit unless the designation is extended.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation At of 2010 extended Code Sec. 51 work opportunity tax credit four months to include individuals who began work before Jan 1, 2012. Under pre-Act law, wages for purposes of the credit didn't include any amount paid or incurred for an individual who began work after Aug. 31, 2011.
The credit allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of the first-year wages up to $6,000 per employee($12,000 for qualified veterans; and $3,000 for qualified summer youth employees). Where the employee is a long-term family assistance (LTFA) recipient the credit is a percentage of the first and second year wages, up to $10,000 per employee. Generally, the percentage of qualifying wages is 40% of the first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. For LTFA recipients, it includes an additional 50% of qualified second-year wages.
The targeted groups are:
- Qualified IV-A recipients Cqualified recipients of aid to families with dependent children or successor program)
- qualified veterans;
- qualified ex-felons
- designated community residents (i.e. the former "high-risk youths" targeted group but with the maximum age requirement raised and the residency requirement expanded to include rural renewal residents)
- vocational rehabilitation referrals
- qualified summer youth employees
- qualified food stamp recipients
- qualified SSI (supplemental security income) recipients
- long-term family assistance recipients, i.e. members of a family that receives or received assistance under a IV-A program for a minimum period of time
- unemployed veterans and disconnected youths who began work for an employer after 2008 and before 2011.
As noted above, the work opportnuity tax credit is scheduled to expire for employees who begin work after 2011. In addition, the renewal community designations expired at the end of 2009. Wages paid or incurred for services performed after 2009 by a designated community resident or summer youth employee who lived in a renewal community may no longer qualitfy for the work opportunity tax credit unless the designation is extended.
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