IRS issues guidance, relief regarding Work Opportunity Tax Credit
The IRS has provided guidance on the extension of the Work Opportunity Tax Credit (WOTC) to unemployed veterans and disconnected youth who begin work for an employer during 2009 and 2010. Transition relief from certification requirements is also available for workers hired during the first part of 2009.
Unemployed veterans. The guidance reiterates the statutory definition of an “unemployed veteran” as any veteran who is certified by the designated local agency (such as a state workforce agency) as having been discharged or released from active duty in the Armed Forces of the United States at any time during the five-year period ending on the hiring date, and as being in receipt of unemployment compensation under state or federal law for not less than four weeks during the one-year period ending on the hiring date. A “veteran” is any individual who is certified by the designated local agency as having served on active duty (other than active duty for training) in the Armed Forces for a period of more than 180 days or as having been discharged or released from active duty in the Armed Forces for a service-connected disability.
Disconnected youths. The guidance reiterates the statutory definition of a “disconnected youth” as any individual who is certified by the designated local agency as being between the ages of 16 and 25 on the hiring date; as not having been regularly employed or having regularly attended any secondary, technical, or post-secondary school during the six-month period preceding the hiring date; and as not readily employable by reason of lacking a sufficient number of basic skills. The guidance provides that an individual was not regularly employed if, during each consecutive three-month period within the six months preceding the hiring date, the individual earned less than an amount equal to the gross amount the individual would have earned working at the minimum wage for 30 hours every week during the three-month period.
An individual was not regularly attending school if the individual states in writing that during the six months preceding the hiring date, he or she has not attended a secondary, technical or postsecondary school for more than an average of 10 hours per week, not counting periods during which the school is closed for scheduled vacations. A general education development (GED) program does not qualify as a secondary school.
Finally, an individual is not readily employable by reason of lacking a sufficient number of basic skills if the individual states in writing that he or she (i) does not have a certificate of graduation from a secondary school or a GED Certificate; or (ii) has a certificate of graduation from a secondary school or a GED certificate that was awarded no less than six months preceding the hiring date, but has not held a job or been admitted to a technical school or post-secondary school since receiving the certificate. Thus, the WOTC for disaffected youth extends to high school graduates who have been unemployed for at least six months since finishing school.
Transitional relief. Generally, a worker cannot be treated as a member of a targeted group that qualifies for the WOTC unless the employer obtains certification from a designated local agency on or before the day the individual begins work that the individual is a member of a targeted group, or completes a pre-screening notice (IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) on or before the day the individual is offered employment and submits that notice to the designated local agency to request certification not later than 28 days after the individual begins work. However, any employer who hires an unemployed veteran or a disconnected youth after December 31, 2008, and before July 17, 2009, will be considered to satisfy the certification deadline if the employer submits the pre-screening notice to the designated local agency to request certification not later than August 17, 2009. The IRS also announced that a revised Form 8850 is now available on the IRS website.
Source: Notice 2009-28, I.R.B. 2009-24, May 28, 2009.
Reprinted with permission. © CCH
<p>IRS issues guidance, relief regarding Work Opportunity Tax Credit The IRS has provided guidance on the extension of the Work Opportunity Tax Credit (WOTC) to unemployed veterans and disconnected youth who begin work for an employer during 2009 and 2010.</p>
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