Work Opportunity Tax Credit

What is Work Opportunity Tax Credit (WOTC)?

The Work Opportunity Tax Credit program is a federal business initiative designed to increase employment opportunities for people who typically experience certain barriers to employment, such as veterans, public assistance recipients, or ex-felons.

WOTC Brochure

Contact WOTC
Call toll-free 1-800-482-2959 or 313-456-2105.
Email WOTCUnit@michigan.gov

Read the WOTC Fact Sheet

Tax Credit Values

The Work Opportunity Tax Credit depends on the number of hours worked in the first year. If an employee works 120-399 hours, the employer qualifies for a 25% tax credit of first year wages. That tax credit increases to 40% if the employee works 400 hours or more.

All or part of the tax credit can be claimed in the year prior to being approved for the credit or spread out over the next 20 years. Eligible new hires cannot have any prior work history with the employer, cannot be a relative of the employer and must be a U.S. citizen or permanent resident.

Employers must submit the proper documentation to prove that the new hire is covered by one of the target groups. Failure to submit the necessary information will delay an application.

Target Group	Tax Credit	First Year Wages
Disabled Veteran	$3,000 - $4,800	$12,000
Disabled and Unemployed Veteran	$6,000 - $9,600	$24,000
Unemployed Veteran (at least 4 weeks)	$1,500 - $2,400	$6,000
Unemployed Veteran (at least 6 months)	$3,500 - $5,600	$14,000
TANF Recipients: Short-Term	$1,500 - $2,400	$6,000
TANF Recipients: Long-Term	$2,500 - $9,000	$10,000 (50% 2^nd year)
SNAP, Designated Community, Voc. Rehab, Ex-Felon, SSI	$1,500 - $2,400	$6,000
Summer Youth (SY)	$750 - $1,200	$3,000
Tax-Exempt Organization: For Qualified Veteran Only	Up to $6,240

Applying for WOTC

An employer must submit to the Michigan Unemployment Insurance Agency IRS Form 8550, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit” and ETA Form 9061, “Individual Characteristics Form” for each newly hired employee who may qualify as a target group member. These forms are included as part of the online WOTC application.

Submit your WOTC application and supporting forms online through your Michigan Web Account Manager (MiWAM) account so your approval determinations are expedited. This ensures you receive your federal tax deduction much faster.

Forms may also be submitted by mail. Keep in mind there are considerable delays when mailing the paperwork to UIA offices.

IRS Form 8850 and ETA Form 9061 must be submitted together:

IRS Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity Credit": Employers use this non-discriminatory form at the time of hire to pre-screen applicants for potential target group membership.
ETA Form 9061, "Individual Characteristics Form": Complete this form after deciding to hire the job seeker.

The IRS and ETA forms as well as the requirements for specific target group documentation can be found at the UIA website or the U.S. Department of Labor website.

WOTC Target Groups

Assistance Program Recipient
TANF Recipients
Veterans
Other Target Groups

Food stamp
Must be 18 to 39 years old on or before the hire date and a member of a family that has received SNAP benefits for the 6-month period that ends on the hire date.

Supplemental Security Income
Must be on SSI for any month ending during the 60-day period before hire date.

Short-term recipient
Must be a member of a family receiving assistance for any 9 months during the 18-month period that ends on the hire date.

Long-term recipient
Must be a member of a family who received assistance for at least 18 consecutive months ending on the hire date; or has received assistance for a total of at least 18 months, whether or not consecutive, between August 5, 1997, and the hire date and at least one payment is within two years of hire; or whose eligibility expired under a federal or state law after August 5, 1997, and was hired within two years after their eligibility expired.

To be considered a veteran, the applicant must have served on active duty for more than 180 days or have a service-connected disability, and not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hire date. Employers must provide a copy of a veteran's DD214 form for verification. In addition, the qualified veteran must meet one of the criteria below:

Veteran SNAP recipient: Must be a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least a 3-month period during the 15-month period ending on the hire date.
Disabled veteran: Must be entitled to compensation for a service-connected disability and is hired not more than 1 year after discharge or release from active duty in the U.S. Armed Forces.
Disabled and unemployed veteran: Must be entitled to compensation for a service-connected disability and has received unemployment compensation for aggregate periods totaling at least 6 months during the 12 months prior to hire.
Unemployed veteran: Must have received aggregated periods of unemployment compensation totaling at least 4 weeks, but less than 6 months, during the 12 months prior to hire; OR periods of unemployment compensation totaling 6 months or more in the 12 months prior to hire.

Vocational rehabilitation work plan participant
A person who is physically or mentally disabled and who is either currently on or has completed a work plan within 2-years before the hire date. Referrals are either from a state agency, the Department of Veterans Affairs, or an employment network under the Ticket-to-Work program.

Person convicted of a felony
Must have a felony conviction or release date that is not more than 1 year prior to the hire date. Provide parole officer's name or statement; correction institution records; or court records extracts.

Resident of designated communities
Must be 18 to 39 years old on or before the date of hire and live in the Rural Renewal Counties (RRC) of Gogebic, Marquette and Ontonagon, or Detroit's Empowerment Zone. Provide a copy of driver's license or W-4.

Summer youth employee
Must be 16 or 17 years old on the date of hire or May 1, whichever is later, is only employed between May 1 and September 15, and lives in an empowerment zone.

Recipient of long-term unemployment
Any individual who is certified by the designated local agency as being in a period of unemployment, which is not less than 27 consecutive weeks and includes a period in which the individual was receiving unemployment compensation under state or federal law.

Related Incentives

Employee Retention Credit

Can be used in conjunction with WOTC for an added tax credit. How the refundable tax credit works:

Can be applied against certain employment taxes equal to 50 percent of the qualified wages paid by an eligible employer after March 12, 2020, and before January 1, 2021.
Can also be applied against 70 percent of qualified wages paid by an eligible employer after December 31, 2020, and before January 1, 2022.
Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make.
The same wages cannot be used to calculate the WOTC and the ERC.
For more information, go to IRS.gov.

Fidelity Bonding

Covers job seekers who are considered high-risk due to factors in their personal backgrounds and who have been rejected by a commercial bonding company. It protects employers from any loss of money or property incurred as a result of dishonesty by high-risk workers.

Created to assist high-risk, but qualified, job seekers who have bona fide offers of employment.
Employers can bond job seekers who are facing barriers to employment for the first six months on the job.
Typically, some employers may view ex-offenders, former substance abusers, and other individuals who have questionable backgrounds as high-risk and potentially untrustworthy workers.
For more information, go to MiTalent.org/Bonding.

More WOTC Information

Keep in Mind

List the employer's name, address and Federal Employer Identification Number (FEIN) on any correspondence.
Employers using employer representatives to process their tax requests, may not have their certifications mailed to the employer representative until either a notarized original or notarized copy of the Power of Attorney is on file with UIA's WOTC Unit.
Upon receipt of the certification notice, the employer is responsible for employing the worker the required number of hours. IRS Form 5884, Work Opportunity Credit, is filed with your federal tax returns. It is available through the IRS website or by calling the IRS toll-free at 1-800-829-1040.

More Resources

ETA Form 9061: Individual Characteristics Form
IRS Form 8850: Pre-Screening Notice and Certification Request for WOTC
ETA Form 9198: Employer Representative Declaration Form
UIA 1061: Veteran Authorization for Release of Information to the WOTC Program
Desk Aid: WOTC Eligibility Desk Aid

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