Work Opportunity Tax Credit (WOTC) for Employers Hiring Certain Qualified Social Security Beneficiaries

Who is Eligible for the Work Opportunity Tax Credit?
Special rules for employers of Social Security Beneficiaries
Can Social Security Beneficiaries Who Work Qualify Employers for WOTC?
How Can I Get More Information?
Internet Sites Providing Information About the Work Opportunity Tax Credit

Who is Eligible for the Work Opportunity Tax Credit?

Private sector employers may be able to take advantage of a tax credit if they hire certain individuals, including participants in the Ticket to Work program. As reauthorized and amended by the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147), the Work Opportunity Tax Credit (WOTC) can reduce an employer's Federal tax liability per each qualified "new" hire. The WOTC serves as an incentive for these employers to hire individuals from specific targeted groups.

Special rules for employers of Social Security Beneficiaries

Section 51 of the Internal Revenue Code, 26 U.S.C. 51, provides for a Work Opportunity Tax Credit for employers who hire members of targeted groups that have a particularly high unemployment rate or other special employment needs (Footnote 1) . While there are several targeted groups, this fact sheet addresses only the two targeted groups to which certain Social Security beneficiaries may belong. These two targeted groups are:

1. Disabled persons who completed (or are completing):
   
   1. rehabilitative services from a State vocational rehabilitation (VR) agency; or
      
   2. employment support services from an employment network under an Individual Work Plan (Social Security Protection Act of 2004, P.L. 108-203, Section 405) and;
2. Recipients of Supplemental Security Income (SSI) benefits.

Can Social Security Beneficiaries May Qualify Employers for WOTC?

Social Security beneficiaries described below may qualify their employers for the WOTC.

First, Social Security Disability Insurance (SSDI) beneficiaries and SSI beneficiaries who are clients of a State VR agency, or who assigned their "tickets" to an employment network and are referred to the employer upon completion of (or while receiving) services through the State VR agency pursuant to an individualized plan for employment, or from an employment network pursuant to an individual work plan may qualify an employer for the WOTC.

Second, SSI recipients who received SSI benefits for any month ending within the 60-day period ending on the hiring date (the day the individual is hired by the employer) may qualify their employer for the WOTC.

"Hiring date" means the date that a definite oral or written agreement to employ is reached between a job seeker and a prospective employer.

NOTE: An individual is not considered a member of a targeted group for purposes of the Work Opportunity Tax Credit unless the designated local agency certifies him or her as a member. The designated local agency is the State Employment Security Agency now sometimes called the State Workforce Agency. Also, there are other requirements which must be met before an employer can claim a tax credit for hiring a member of a targeted group. Interested employers should familiarize themselves with these requirements in advance.

How Can I Get More Information?

Visit the Internet sites of the Department of Labor and the Internal Revenue Service that are shown below for more complete information about:

• the Work Opportunity Tax Credit,

• the ways in which the certification requirement can be satisfied,

• other requirements which must be met for the tax credit to apply, and

• other targeted groups covered by the tax credit.

Internet Sites Providing Information About the Work Opportunity Tax Credit

Department of Labor

http://www.uses.doleta.gov/tax.asp

Internal Revenue Service

http://www.irs.gov/publications/p954/index.html

or call 1-800-829-3676.

Footnote 1

According to the Working Families Tax Relief Act of 2004, Section 303, the Work Opportunity Tax Credit applies to new hires who begin work for an employer before January 1, 2006