The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.  In order to get this credit, the employer must submit a completed Form 8850 to the Department of Labor within 28 days of the eligible employee’s start date.  By submitting this form, the DOL is certifying the individual is a member of the targeted group.

There is a significant opportunity for 2021: The certification deadline has been extended to November 8, 2021, for two of the targeted groups: designated community residents and qualified summer youth.  If you have hired someone in one of these targeted groups between January 1, 2021 and October 9, 2021, you have until November 8 to submit Form 8850. 

A designated community resident is between the age so 18 and 40 and lives in a designated empowerment zone or a rural renewal county.  Oglala Sioux Tribe (parts of Jackson and Bennett Counties and all of Shannon County) is a designated empowerment zone.

The rural renewal counties in South Dakota are Aurora, Campbell, Clark, Day, Deuel, Douglas, Faulk, Grant, Gregory, Haakon, Hand, Harding, Hutchinson, Jones, Kingsbury, Marshall, McPherson, Miner, Perkins, Potter, Sanborn, Spink, Tripp, and Walworth.  Carbon and Niobrara in Wyoming are also rural renewal counties.

Qualified summer youth are at least 16 years old but under 18 on the date of hire or on May 1, whichever is later; only worked between May 1 and September 15; and resides in an empowerment zone or renewal community (see above).

If you have hired employees that live and work in this counties, it would be worth taking advantage of this extension!  The WOTC is equal to 40% of up to $6000 in wages paid to individuals in their first year of employment and work at least 400 hours.  A reduced credit of 25% is available for individuals that worked 120-400 hours.

In today’s tight labor market, businesses have had to dig deeper to find employees. As a reminder, although not eligible for the extension, the WOTC is also available to employees hired from the following targeted groups:

  • Qualified Veteran
  • Ex-Felon
  • Vocational Rehabilitation Referral
  • Qualified IV-A Recipient
  • Supplemental Nutrition Assistance Program Recipient
  • Supplemental Security Income Recipient
  • Long-Term Family Assistance Recipient
  • Qualified Long-Term Unemployment Recipient

Contact the professionals at Ketel Thorstenson with any of your work opportunity tax credit questions.