Work Opportunity Tax Credit
What is the Work Opportunity Tax Credit or WOTC?
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring individuals from specific target groups who have consistently faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.
WOTC helps targeted employees move from economic dependency to self-sufficiency while earning a steady income and becoming contributing taxpayers. Benefits to the hiring business include:
- The employer makes the final hiring decision on candidates presented.
- There is minimal paperwork to complete for claiming the tax credit.
- The employer can hire as many qualified candidates as the business needs.
- There are numerous qualified groups of candidates to hire, including veterans.
The U.S. Department of Labor’s (USDOL) WOTC website offers key information about the tax credit and helpful resources. In addition, L&I’s WOTC one-pager provides helpful information regarding the program in Pennsylvania.
Pennsylvania’s Department of Labor & Industry (L&I) makes it easy for businesses to take advantage of the tax credits available.
How Does WOTC Work?
An employer must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. An eligible employer must file
Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit through L&I within 28 days after the eligible worker’s start date.
Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. Use the
WOTC Calculator to see how much your business can earn in tax credits.
USDOL ETA has released TEGL 16-20 which changes the procedural guidance for WOTC applications. Please pay special attention to page 5, (Item C) and page 7, (Employer Appeals). Please note employers must have their EIN registered with our Unemployment Commission to submit WOTC applications.
If you have any questions, please contact the Tax Credit Services Unit at (800) 345-2555 or RA-BWPO-TaxCredits@pa.gov.