The Protecting Americans from Tax Hikes Act of 2015 (PATH), signed into law by President Barack Obama on December 18, 2015, retroactively reinstated WOTC for five years, from January 1, 2015 and effective in 2016 extends the credit to the long-term unemployed,

The IRS has now issued guidance in Notice 2016-22 concerning the procedures that now apply under the PATH act including an extended the 28-day deadline for filing IRS Form 8850 and US Department of Labor, Employment and Training Administration (ETA) Forms 9061 and 9062 for the purpose of claiming the Work Opportunity Tax Credit (WOTC) through the designated state workforce agencies to June 29, 2016.

Extension of the deadline to file 2015 Forms 8850, 9061 and 9062

The IRS states that Form 8850, Pre-Screening Notice and Certification Request for the WOTC, and Form 9061, Individual Characteristics Form, or Form 9062, Conditional Certification, will be deemed to have been timely filed if submitted to the authorized state employment security agency by June 29, 2016. This extended filing date applies to:

— An employer that hires a member of a WOTC targeted group (other than qualified long-term unemployment recipients) on or after January 1, 2015, and before May 31, 2016.

— An employer that hires a qualified long-term unemployment recipient on or after January 1, 2016, and before May 31, 2016.

WOTC state certification requirements — background

Before claiming the WOTC tax credit, an employer must obtain certification that an individual is a member of a targeted group. An individual is not treated as a member of a targeted group unless

(i) on or before the day the individual begins work for the employer, the employer obtains certification from a state workforce agency (SWA) that the individual is a member of a targeted group; or

(ii) on or before the day the individual is offered employment with the employer, a prescreening notice (IRS Form 8850) is completed and no later than 28 days after the individual begins work, the employer submits the prescreening notice to the SWA for certification.

An employer obtains certification of an individual's targeted group status from an SWA by submitting both the IRS Form 8850 and an ETA Form 9061 or 9062 to the SWA. Employers are encouraged to submit both the IRS Forms 8850 and the ETA Forms 9061 or 9062 together in the same submission.

WOTC credit for long-term unemployment recipients

PATH modified the WOTC credit beginning in 2016 to apply to employers that hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increased the credit for such long-term unemployed individuals to 40% of the first $6,000 of wages.

Notice 2016-22 states that the IRS and ETA are modifying Forms 8850, 9061 and 9062 so that they can be used to request certification by the SWAs for qualified long-term unemployment recipients. The modified forms and instructions will indicate the information that must be provided on the forms for the employer to receive certification from the SWA that the individual is a qualified long-term unemployment recipient. The Treasury Department and the IRS anticipate that the modified forms will include a requirement that the individual signing the form attest that he or she meets the requirements to be a qualified long-term unemployment recipient and a requirement that the individual attest to the period(s) during which the individual was unemployed and the period the individual received unemployment compensation.

Guidance issued to SWAs

In guidance issued to the SWAs on the processing of WOTC applications now that the program is retroactively reinstated, SWAs were instructed to continue to process employers' timely filed certification requests using the current forms for individuals within all the reauthorized target groups. However, until the ETA and IRS modify Forms 8850, 9061 and 9062 to include the new long term unemployment recipient target group, the ETA says that SWAs should encourage employers and their representatives to postpone certification requests for the new target group until the revised forms are available.

Note: According to the ETA, employers may choose to file Forms 9061/9062 (showing an expiration date of August 31, 2018) that indicate "Long-term unemployment recipient" in the top margin, right corner, under the expiration date. SWAs are instructed to accept employer applications for the new target group using the current ETA Forms 9061 or 9062, but postpone processing these certification requests until the ETA issues additional guidance.

———————————————

———————————————