Claim the Work Opportunity Credit (WOC) and save on hiring costs
A federal tax credit designed to incentivize hiring individuals from specific target groups facing significant barriers to employment.
Who can qualify?
- Veterans with service-connected disabilities or unemployed for a designated period.
- Temporary Assistance for Needy Families (TANF) Recipients currently receiving benefits.
- Supplemental Security Income (SSI) Recipients receiving income due to disability.
- Long-Term Unemployed Individuals unemployed for at least 27 weeks and are currently receiving unemployment benefits.
- Ex-Felons convicted of a felony and hired within a year of conviction or release from incarceration.
- Designated Community Residents residing in economically disadvantaged areas.
- Qualified Summer Youth Employees aged 16 or 17, working during the summer.
How to claim the credit
- Submit Form 8850: Request pre-screening notice and eligibility certificate of the employee for the WOC from your state workforce agency within 28 days of the employee’s start date.
- Certification: The state workforce agency reviews Form 8850 and, if the employee qualifies, issues certification for the Work Opportunity Credit.
- File Form 5884: Once certified, employers must complete and submit IRS Form 5884, with their annual tax return, detailing eligible employees and the credit claimed.
Credit calculation:
- It varies by target group and employment duration.
- It is a percentage of qualified wages paid during the first year of employment.
*Check for annual updates and legislative changes on percentages and maximum credit amounts.
Benefits of the Work Opportunity Credit:
- Reduce hiring costs: The WOC offers a tax credit to employers, reducing the cost of hiring individuals from specific groups, also making it affordable to employ those who may face barriers to employment.
- Support struggling communities: Encouraging businesses to hire, boosts the local economies by hiring from economically disadvantaged areas.
Important considerations:
- Employers must adhere to procedural requirements and timely submission to ensure eligibility.
- Employers can benefit from tax savings while contributing to workforce development and inclusion.
Related reading
Form 5884 is filed with your annual return, and our US business tax deadlines and forms calendar maps those due dates and credit forms.