If you need to hire employees within the next few months, you might qualify for a tax break by taking advantage of 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.
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.
The WOC applies only to employees who start to work for you after September 30, 1996 and before October 1, 1997. Those employees must also fall into one of these seven target groups.
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.
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.
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.
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.
The employee must have a physical or mental disability and must have been referred to the employer from a state-approved vocational rehabilitation program.
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 September 15, 1997, and complete at least 120 hours of paid employment. Additionally, the youth must live in a government-designated empowerment or enterprise zone.
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.
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.
Eva Rosenberg, MBA, is an Enrolled Agent in Encino, Calif. Please e-mail
questions about this column to info@nase.org or mail them to
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