The IRS has issued additional transition relief (Notice 2016-40) for employers who claim the work opportunity tax credit (WOTC) for employees hired between Jan. 1, 2015, and Aug. 31, 2016.
WOTC originally expired for employees hired beginning in 2015 but was reinstated retroactively late in the year. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) retroactively extended the credit to cover qualified employees hired between Jan. 1, 2015, and the end of 2019. The PATH Act also created a new eligible category for long-term unemployed new hires beginning in 2016.
To qualify for the credit, employers must generally obtain a certification of eligibility from a designated local agency on or before the day an employee begins work or file a Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity Credit," within 28 days of when the employee begins work.
The IRS recognized that the retroactive nature of the extension of the credit for 2015 created certification problems for many employers and that the IRS needed time to revise its forms to include the new category of eligible hires for 2016. The agency originally issued transition relief in Notice 2016-22, which gave employers until June 29, 2016, to file Form 8850 for hires made between the beginning of 2015 and May 31, 2016.
Notice 2016-40 now extends this transition relief to account for the timeframe in which the relevant forms and instructions were released. Only employers hiring an eligible individual between Jan. 1, 2015, and Aug. 1, 2018, need to file Form 8850 by Sept. 28, 2016.
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