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Work Opportunity Tax Credit (WOTC)

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​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​What is WOTC?

The Work Opportunity Tax Credit (WOTC), is a general business credit that is jointly administered by the IRS and the Department of Labor (DOL). The WOTC may be claimed by any employer that hires and pays or incurs wages to certain individuals who are certified by the Kentucky Career Center as being a ​member of ​​a targeted groups to be claimed for the WOTC. Find out more

​​The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who invest in Kentucky job seekers who have consistently faced barriers to employment. Employers may meet their business needs and claim a tax credit if they hire an individual who is in a WOTC eligible target group. Employers must apply for and receive a certification verifying the new hire is a member of a targeted group before they can claim the tax credit. After the required certification is secured, taxable employers claim the WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes. Here is a WOTC Tax Cred​it Calculation​ Chart​

If you hire an employee who qualifies under any of the target groups, here is link to the Kentucky Career Center EMPLOYER'S GUIDE How to ​Apply for a WOTC​.

Employers can hire eligible employees from the following target groups for WOTC. For more details please see the ​Kentucky Career Center WOTC Target Groups guide.

Below are flyers for specific target groups

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NOTE: WOTC requires employers, or service providers submitting WOTC applications to be submitted no later than 28 days from the employees start date to be considered timely.

  • IRS 8850 with instruction Employers use Form 8850 to pre-screen and to make a written request to the Kentucky Career Center Office of Employer & Apprenticeship Services in which their business is located (where the employee works) to certify an individual as a member of a targeted group for purposes of qualifying for the work opportunity credit.
  • Individual Characteristics Form (ICF) ETA Form 9061 (OR) ETA Form 9062 must be completed and submitted to the state workforce agency to complete the application
  • Employers file Form 5884 to claim the work opportunity credit for qualified first- and/or second-year wages they paid to or incurred for targeted group employees during the tax year.
  • A tax-exempt organization that hires an employee in the WOTC veteran target group should use IRS Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.
  • Form 9198​​ - Employer Representative Declaration​ Form ​authorizes an individual to represent you (employer) for WOTC purposes.
  • WOTC 28 Day Timeliness Rule Explained
    WOTC requires employers, or service providers submitting WOTC applications to be submitted no later than 28 days from the employees start date to be considered timely.

The Kentucky Fair Chance Bonding Program​ assists “at-risk” job seekers who may have a risk factor in their personal background. Job seekers who may benefit from this program include:

  • ex-offenders
  • a recovering substance abuser
  • someone who has poor credit or who has declared bankruptcy
  • a person who was dishonorably discharged from the military
  • economically disadvantaged youth who lack a work history

Individuals who may be eligible for a WOTC target group may also have a risk factor as listed above and, therefore, may benefit from The Kentucky Fair Chance Bonding Program. Employers are encouraged to contact the state WOTC Coordinator to learn how. The Kentucky Fair Chance Bonding Program may be used along with WOTC.

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Who Qualifies for WOTC?

WOTC applies only to new employees. The new employee must belong to one of the following target ​​​​groups:

A member of a family who has received or is receiving Temporary Assistance to Needy Families (TANF) or Aid to Families with Dependent Children AFDC​ or a successor program. Employee must have received benefits for at least 9 of the last 18 months ending on the hiring ​date.

  • Veteran receiving SNAP:
     is a Veteran who is member of a family that received SNAP benefits (food stamps) for 3-month consecutive months during the 15-month period ending on the hire date.
  • Veteran Disabled Discharged (within year):
     is a Veteran who is entitled to compensation for a service connected disability and is hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces.
  • Veteran Disabled and Unemployed:
     is a Veteran who is entitled to compensation for a service-connected disability; and was unemployed at least 6 months during the year ending on the hire date.
  • Veteran Unemployed 4 weeks:
     is a Veteran who was unemployed for a period or periods totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date.
  • Veteran Unemployed 6 months:
     is a Veteran who was unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the ​1-year period ending on the hiring date.
  • Veterans Affairs Referral:
     is an individual with a disability who completed or is completing rehabilitative services from the U.S. Department of Veteran of Affairs.

is an individual who has been convicted of a felony and has release date from prison within 1 year prior to the hire date. Or, an individual charged with a felony received “deferred adjudication” (without a finding of guilty, but only if the court considers this to have been a “conviction”) and was placed on probation within 1 year prior to the hire ​date.​​​

is an individual who has a physical or mental disability resulting in a substantial handicap to employment and who was referred to the employer upon completion of (or while receiving) rehabilitation services by a rehabilitation agency approved by the state, an employment network under the Ticket to Work program, or the Department of Veterans ​Affairs.

is an 18-39-year-old who is a member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits for the 6-month period ending on hire date. Or is an 18-39 year old who is a member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits at least 3 months out of the 5-month period ending on the hire date, but has been determined ineligible to ​participate in the SNAP Program as the result of a failure to comply with the work requirements (Able-Bodied Adult without Dependents).

is a recipient of SSI benefits for any month ending within the 60-day period ending on the hire date. Note: Those receiving Social Security Disability Income (SSDI) are not the same as SSI ​recipients.

is a member of a family that received TANF benefits for 9 months (whether or not consecutive) during the 18 months ending on ​the hire date.

is any individual who:

  • Has received Temporary Assistance to Needy Families (TANF), or a successor program, for at least 18 consecutive months ending on the hiring date, or
  • Has received TANF for a total of at least 18 months, whether or not the months are consecutive, beginning after August 5, 1997, and whose hiring date is not more than two years after the end of the earliest 18-month period, or
  • Whose TANF eligibility expired, and has a hiring date within two years of the TANF eligibility expiration date, but after August 5, ​1997.

An individual hired after December 31, 2015 who is in a period of unemployment that is not less than 27 consecutive weeks, and includes a period (which may be less than 27 consecutive weeks) in which the individual received unemployment compensation under state or federal ​law.​

Tax-exempt Employers

Qualified tax-exempt organizations described in IRC Section 501(c) and exempt from taxation under IRC Section 501(a), may claim the credit for qualified veterans who began work for the organization after 2020 and before 2026. After the required certification (Form 8850) is secured, tax-exempt employers claim the credit against the employer Social Security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

File Form 5884-C after filing the related employment tax return for the period that the credit is claimed. The IRS recommends that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit. The credit will not affect the employer’s Social Security tax liability reported on the organization’s employment tax return.​

WOTC Videos

WOTC Can Help
How can your business save money in tax credits and gain the workforce you need to be successful?

WOTC Veteran Video
Find out how you can save money in tax credits when you hire veterans on your workforce.

WOTC Second Chance Video
Find out how you can save money in tax credits when you hire people looking for a second chance...and an opportunity.

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