There’s good news for some as well as relief as the Internal Revenue Service is providing transition relief to certain employers claiming the Work Opportunity Tax Credit.

The WOTC is a federal income tax credit available to employers that hire certified members of certain groups specified in the Internal Revenue Code who face significant barriers to employment, including Designated Community Residents or Qualified Summer Youth Employees, according to a news release.

Newly Issued

The IRS recently issued Notice 2021-43 PDF, which extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between Jan. 1 and Oct. 8 is a Designated Community Resident or a Qualified Summer Youth Employee, according to a news release.

To be certified as a Designated Community Resident or a Qualified Summer Youth Employee under the WOTC, an employee must have a principal place of residence within an Empowerment Zone where the employee continuously resides, the news release added.

Empowerment Zone

Empowerment Zone designations terminated on Dec. 31, 2020, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021, permitted the designations to be extended through 2025. On May 26, 2021, all Empowerment Zone designations were extended from Dec. 31, 2020, to Dec. 31, 2025.

Transiton Period

The transition relief under this notice allows employers to submit Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) for these employees until Nov. 8, 2021, according to the news release.

The notice also guides certain employers who submitted a Form 8850 to a DLA for these employees during the period of transition relief and received a denial due to the termination of Empowerment Zone designations on December 31, 2020, or who received certification before Empowerment Zone designations were extended, the news release added.

More WOTC Info

The WOTC has been subject to several legislative extensions and modifications since its enactment by the Small Business Job Protection Act of 1996. The amount of the tax credit under WOTC equals a percentage of qualified wages paid in a given tax year to an employee certified by the DLA as being a member of one of the groups specified in the law.

Source: IRS