WOTC Form 8850 Overview

Each year, employers claim over $1 billion in tax credits under the Work Opportunity Tax Credit program, designed to assist individuals who consistently experience high rates of unemployment due to a variety of employment barriers. The amount of the tax credit may be up to $9,600 for each qualified individual, giving the employer a reason to hire someone who might not be as skilled or experienced as other applicants.

However, before employers can claim WOTC, they must first receive certification from a State Workforce Agency (SWA) confirming that the new hire meets the qualifications of one of the target groups. This is done using WOTC Form 8850 and one of two forms from the Department of Labor.

WOTC Certification Forms

In order to claim tax credits, employers are required to certify that a potential employee is a member of a targeted group. This includes filling out different forms, with information from both the employee and the employer.

WOTC Form 8850

The IRS designed WOTC Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to help employers obtain confirmation of job applicants’ WOTC eligibility status before making an employment offer. Therefore, eligible individuals are asked to self-identify using WOTC Form 8850, which, in Box 2, broadly inquires as to whether the job applicant qualifies for the tax credit as a member of one of the following target groups:

  • Qualified veterans, including those receiving supplemental nutrition assistance program (SNAP) benefits, those who are unemployed, and those who are unemployed and entitled to compensation from a service-connected disability,
  • Individuals who receive temporary assistance for needy families (TANF) benefits under Part A, Title IV of the Social Security Act,
  • Qualified ex-felons,
  • Designated community residents who are at least 18 and under 40 and live in an empowerment zone, enterprise community, or renewal community,
  • Individuals with physical or mental disabilities who have been referred for work after completing rehabilitative services,
  • Summer youth employees,
  • Supplemental nutrition assistance program (SNAP) recipients,
  • Supplemental Security Income (SSI) recipients,
  • Long-term family assistance recipients, and
  • Qualified long-term unemployment recipients.

Both the employee and the employer must sign WOTC Form 8850 before the employer files the form with the employer’s state workforce agency. Employers have 28 days from a qualified employee’s start date to send the form.

ETA Form 9062 and ETA Form 9061

In addition to filing WOTC Form 8850, employers must complete and send either:

  • ETA Form 9062, Conditional Certification Form, if an employee has already been conditionally certified by the employer’s state workforce agency, or
  • ETA Form 9061, Individual Characteristics Form, to be completed by the employee, while the employer must verify that the information is correct using supporting documents. Such documents may include a copy of the employee’s birth certificate, military discharge papers, or records of receiving SNAP or SSI benefits, depending on which targeted group they belong to.

Missing an Opportunity to Maximize WOTC Credits

Even though the WOTC program encourages businesses to hire individuals who consistently face a variety of employment barriers, many employers avoid participating in it due to fears of discrimination claims, thus failing to take advantage of WOTC benefits. Taking their concerns into consideration, the Equal Employment Opportunity Commission (EEOC) issued an opinion letter in favor of using WOTC Form 8850.

The EEOC’s opinion letter clarifies that proper use of WOTC Form 8850 does not violate EEO laws, including the Americans with Disabilities Act’s (ADA) prohibition on pre-offer disability inquiries, the Age Discrimination in Employment Act (ADEA), or Title VII of the Civil Rights Act.

EEOC finds that the form’s single, broad question is not a disability-related inquiry under the ADA. The specific questions for disabled veterans are subject to an exception under the ADA, as responses are voluntary and used for affirmative action purposes. Additionally, the information requested is necessitated by another law, which is another defense under the ADA. In relation to the ADEA, EEOC clarifies that applicants who enable an employer to qualify for the tax credit include individuals both under and over age 40, and WOTC Form 8850 does not identify into which category a particular applicant falls. Furthermore, the form does not put an employer in the position of violating Title VII, because it does not ask whether an individual belongs to a particular Title VII protected group.

Therefore, the EEOC’s opinion letter supports employers to take advantage of WOTC without any fears of discrimination claims resulting from information obtained through WOTC Form 8850. However, employers need to maintain strict compliance as any changes to WOTC Form 8850’s language or other requirements can eliminate the applicability of the opinion letter, and its potential use as a defense against federal discrimination claims.

Overcoming WOTC Challenges

Participating in the WOTC program may seem like an overwhelming procedure for both applicants and employers. Tax-credit screening, document collection, background checks, and employment verification are all components that take up a lot of time and resources.

Still, while applying for WOTC can be challenging for employers, the benefits they can gain are much more significant, especially with an automated WOTC process that ensures efficient capture of available tax credits and reduces the risk of hiring discrimination. An electronic WOTC solution takes new hires through WOTC Form 8850 electronically, by eliminating all administrative challenges and time-consuming steps. As a result, employers ensure efficient capture of available tax credits while remaining compliant.

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