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IRS Notice Regarding WOTC Transition Relief and New Qualification Category

The IRS published today Notice 16-22 concerning the extension of the federal Work Opportunity Tax Credit (WOTC) and the addition of a new qualification category. Consistent with recent IRS action, the Service is allowing a period of transition relief to allow taxpayers to submit WOTC applications to the states despite the requirement that applications must normally be submitted within 28-days of an employee’s start date. For employees not in the new qualified long-term unemployment recipient category, taxpayers will have until June 29, 2016 to submit applications for employees hired between 1/1/2015 and 5/31/2016.

The new category of qualified employee added by Congress to WOTC last year is long-term unemployment recipients. These are individuals who have been unemployed for at least 27 consecutive weeks prior to being hired by the taxpayer applying for the credit, and who received unemployment compensation benefits during some of that time. Since this category did not become effective until 2016, the transition relief period for submitting applications with this category is until June 29, 2016 for employees hired between 1/1/2016 and 5/31/2016.

The new qualification category requires the use of a new IRS Form 8850 and Department of Labor Form 9061 which have yet to be published. The notice indicates that these new forms may require employees qualifying in this new category to attest to their periods of unemployment and receipt of unemployment compensation.

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