While there has been a lot of buzz around all the new payroll tax credits provided as relief to employers through the various financial measures implemented during the pandemic, there is one tax credit that seemingly fell through the cracks: The Work Opportunity Tax Credit. This credit is refundable on an employer’s federal tax return (individual income tax return for flow-through owners) for certain new hire employees who fall within one of ten targeted groups.
To claim the credit, employers must submit completed Form 8850 to a designated local agency (DLA) for certification that the employee is a targeted group member. Generally, these forms must be submitted within 28 days of the hire date.
The IRS recently issued Notice 2021-43 allowing an extension of time for employers to submit Form 8850 and obtain certification. In accordance with the notice, employers now have until November 8, 2021 to submit Form 8850 to a DLA for employees hired between January 1, 2021 and October 9, 2021.
One of the targeted groups is new hire employees who were unemployed for 27 consecutive weeks. Given the circumstances of the past year and a half, this group of eligible workers may have increased substantially. If you missed the initial 28-day filing deadline or were unaware of the credit, the recent notice is offering relief for employers to look back and now submit those Form 8850s for certification.
Forms submitted by November 8 will be considered timely-filed. Note that while many workers may have been out of work for a qualified period, certification will not be granted for furloughed employees who have since returned to work. Additionally, the credit cannot be taken on wages paid to certified employees for which the Employee Retention Credit is also being taken.