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EMPLOYERS: 9 New Ways Employers Can Earn Federal Income Tax Credits

The Welfare-to-Work and Work Opportunity Tax Credits

Two Employer-Friendly Benefits for Hiring job Seekers Most in Need of Employment

How to Earn Tax Credits For New Hires

How To Apply For The Tax Savings

Where To Get More Information

Earn the Welfare-to-Work and Work Opportunity Tax Credits

► Employers make the hiring decision
► No limit to the number of new hires who can qualify their employer for these tax savings
► Minimal paperwork to claim the tax credits

On August 5, the Taxpayer Relief Act of 1997 reauthorized and expanded the Work Opportunity Tax Credit (WOTC) and created a Welfare-to-Work Tax Credit for long-term welfare recipients.

The Welfare-to-Work Tax Credit for hiring long-term welfare recipients is as much as $8,500 per new hire: 35% of qualified wages for the first, and 50% for the second, year of employment. Qualified wages -- which include tax-exempt amounts received under accident and health plans as well as educational and dependant assistance programs -- are capped at $10,000 per year. To
qualify employers for this tax credit, new hires must begin work any time after December 31, 1997, and before May 1, 1999, and must be employed at least 400 hours or 180 days.

The Work Opportunity Tax Credit for hiring all WOTC target groups, except Summer Youth Employees, is up to $2,400 for each new hire: 40% of qualified first-year wages for those employed 400 or more hours; 25% for those employed at least 120 hours. Qualified wages are capped at $6,000. Summer Youth wages are capped at $3,000. To qualify employers for the WOTC, new hires must begin work before July 1, 1998.

Note: The President's fiscal 1999 budget proposes reauthorizization of both tax credits through April 30, 2000.

Hire From Among These Nine Groups of Job Seekers to Qualify for the Welfare-to-Work Tax Credit or the WOTC

1. Long-term welfare recipients -- member of a family that received Aid to Families with Dependent Children (AFDC) or its successor program, Temporary Assistance for Needy Families (TANF), for at least 18 consecutive months before date of hire, or whose family's AFDC/TANF eligibility expired under federal or state law after August 5, 1997, or whose family received AFDC/TANF for at least 18 months after August 5, 1997 -- are eligible for the new Welfare-to-Work tax credit

2. Other welfare recipients -- member of a family that received AFDC/TANF for a total of at least 9 of the 18 months before date of hire -- eligible for the WOTC

3. Veteran -- veteran and member of a family that received food stamps for at least 3 (consecutive) months of the 15 months before date of hire -- WOTC

4. 18-24 year-old food stamp recipients -- member of a family that received food stamps for at least the 6 (consecutive) months before date of hire, or for at least 3 of the 5 months before date of hire and their food stamp eligibility expired -- WOTC

5. 18-24 year-old EZ/EC residents -- of one of the 105 federally designated Empowerment Zones or Enterprise Communities (EZ/ECs)* -- WOTC

6. 16-17 year-old EZ/EC residents -- hired as Summer Youth Employees -- WOTC

7. Vocational rehabilitation referrals -- a disabled person who completed or is completing rehabilitative services approved by a state or the U.S. Department of Veteran Affairs --WOTC

8. Ex-felons -- ex-felon and member of a low-income family -- WOTC

9. SSI recipients -- received Supplemental Security Income benefits for any month during the 60 days before date of hire -- a new WOTC target group

* For information about EZ/ECs, visit the EZ/EC website: http//www.ezec.gov or call 1-800-998-9999

Applying for Welfare-to-Work or Work Opportunity Tax Credit Certification Takes Three Simple Steps

Employers must apply for and receive certification from their state employment agency that their new hire is a long-term welfare recipient or member of one of the WOTC target groups before they can claim the Welfareto-Work or Work Opportunity Tax Credit on their federal tax return. To apply for certification, employers must:

1. Complete the one-page IRS Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Tax Credits," by the date of the job offer, and

2. Complete either the one-page U.S. Department of Labor

►ETA Form 9062,"Conditional Certification Form," if provided to the job seeker by a participating agency, such as the Job Corps, or
►ETA Form 9061, "Individual Characteristics Form," if the new hire has not been given a conditional certification, and

3. Mail the signed IRS and the ETA form to their state employment agency's WOTC Coordinator. Note: the IRS form must be mailed to the state WOTC Coordinator not later than 21 days after the new hire's start date.

To get IRS 8850, download it from http://www.irs.ustreas.gov or call 1-800-829-3676.

To get ETA 9061, download it from http://www.doleta.gov/wotc.htm or call your state WOTC Coordinator.

Who Doesn't Qualify

►No tax credit can be claimed for wages paid to relatives.
►No tax credit can be claimed for federally subsidized on-the-job-training; however, wages paid after the subsidy expires can qualify for the credits.
►The Welfare-to-Work Tax Credit and WOTC cannot both be claimed for the same individual in the same taxable year.

Call Your State Employment Agency WOTC Coordinator

To learn more about the WOTC and Welfare-to-Work Tax Credits, call your State WOTC Coordinator, visit the WOTC website, http://www.doleta.gov/wotc.htm, or call your local employment service office. If you have tax-related questions, call Robert Wheeler at IRS -- 202-622-6060.

The Welfare-to-Work and WOTC Tax Credits Employer-Friendly Benefits

The Welfare-to-Work and Work Opportunity Tax Credits reduce an employer's cost of doing business and require little paperwork. The success and growth of these federal income tax credits for private-sector employers depend on a strong public- and private-sector partnership. Helping those most in need find and retain jobs and gain on-the-job experience benefits all employers and increases America's economic growth and productivity.

We need your input to make the Welfare-to-Work and Work Opportunity Tax Credits work. Let us know how we can improve their value to you and your employees. Be part of that success!

The information contained in this brochure was coordinated with employers and employer organizations by the National Employer Council Inc., 444 North Capitol Street NW, Washington, DC 20001, 202-624-3650, for the U.S. Department of Labor.

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