United States

IRS extends transition relief for Work Opportunity Tax Credit

Retroactive request deadline extended to Sept. 28, 2016


The Protecting Americans from Tax Hikes (PATH) Act was enacted at the end of 2015 and extended and modified numerous tax credit programs, including the retroactive extension of the Work Opportunity Tax Credit (WOTC) from Jan. 1, 2015, through Dec. 31, 2019. The IRS recently released Notice 2016-40, providing additional transition relief for employers claiming the WOTC, extending by three months the transition relief that was previously provided in Notice 2016-22 for meeting the 28-day deadline for requesting the required certifications from a designated local agency for employees in targeted groups. The initial deadline of June 29, 2016, is now extended to Sept. 28, 2016.

WOTC is a federal income tax incentive administered by the U.S. Department of Labor (DOL) for employers who hire individuals from specified target populations. WOTC reduces a business’s federal tax liability by up to $9,600 per eligible employee. Employers may file claims for employees who have worked a minimum of 120 hours and meet one of the following target criteria: 

  • Long-term family assistance recipient
  • Qualified recipient of Temporary Assistance for Needy Families (TANF)
  • Qualified veteran
  • Qualified ex-felon
  • Designated community resident (i.e., federal empowerment zones (EZ) and rural renewal counties (RRC))
  • Vocational rehabilitation referral
  • Summer youth employee
  • Supplemental Nutrition Assistance Program (SNAP) recipient
  • Supplemental Security Income (SSI) recipient
  • Qualified long-term unemployment recipients that begin work on or after Jan. 1, 2016

This three-month extension of the deadline for retroactive certification requests provides additional relief to employers and state agencies to prepare and process certification requests for 2015.


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