The WOTC was extended through December 31, 2013, by the American Taxpayer Relief Act of 2012 (enacted January 2, 2013).
Notice 2013-14 [PDF 19 KB] provides additional time—until April 29, 2013—for employers and tax-exempt organizations that hire such persons who are members of targeted groups to submit a request for certification on Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to Designated Local Agencies (DLAs).
Background
The WOTC is available as a credit for employers that hire individuals who are members of targeted groups. An employer must:
- Submit Form 8850 to the “designated local agency” (i.e., a state employment security agency) no later than the 28th day after the individual begins working for the employer, and
- Before claiming a credit for that individual, obtain certification that the individual is a member of a targeted group from the designated local agency
Provisions of 2011 legislation (VOW to Hire Heroes Act of 2011) extended and expanded the WOTC to employers hiring certain “qualified veterans” through December 31, 2012, but did not extend the WOTC for targeted group members other than qualified veterans. Thus, the WOTC was not available for targeted group members who began work after December 31, 2011, other than qualified veterans.
The 2011 legislation also provided a “reduced WOTC” for qualified tax -exempt organizations as a credit against the employer’s share of social security tax, but only for qualified veterans. The reduced WOTC was available only for qualified tax-exempt organizations that hired qualified veterans on or after November 21, 2011, through December 31, 2012.
Notice 2012-13 provided transition relief from the 28-day certification request requirement for all employers that hired any qualified veteran on or after November 22, 2011, and before May 22, 2012. Those employers were considered to have satisfied the WOTC requirements if they submitted the completed Form 8850 to the designated local agency to request certification not later than June 19, 2012.
WOTC extended retroactively
The American Taxpayer Relief Act of 2012 extends the WOTC for targeted employees who begin work through December 31, 2013:
- For taxable employers hiring individuals in any targeted group, including qualified veteran
- For qualified tax-exempt organizations hiring qualified veterans
[Note that the WOTC extension through 2013 does not apply to the “unemployed veterans” or “disconnected youth” targeted group categories— two categories that applied only to certain employees who began work in calendar years 2009 or 2010.]
Thus, the availability of the WOTC for taxable employers who hired individuals from targeted groups other than qualified veterans in 2012 was extended retroactively.
Qualified tax-exempt organizations may continue to claim the WOTC only for hiring qualified veterans, and not for hiring any other targeted group members.
Transition relief
Given the retroactive application of the WOTC reinstatement, the IRS has determined that transition relief is needed, to provide employers additional time as follows:
- Transition relief for taxable employers that hire members of targeted groups (other than qualified veterans) - A taxable employer that hires a member of a targeted group (other than a qualified veteran) on or after January 1, 2012, and on or before March 31, 2013, will be deemed to have satisfied the requirement to request certification if the employer submits a completed Form 8850 to the designated local agency to request certification not later than April 29, 2013.
- Transition relief for all employers that hire qualified veterans - An employer that hires any qualified veteran on or after January 1, 2013, and on or before March 31, 2013, will be considered to have satisfied the requirement to request certification if the employer submits the completed Form 8850 to the designated local agency to request certification not later than April 29, 2013.
KPMG observation
Notice 2013-14 does not provide any relief from the requirement that certification of an employee must be obtained before the employer can claim the WOTC for wages paid to that employee. A designated local agency’s procedures for making certifications remain the discretion of the agency.