DECEMBER 12, 2007 - The federal program that helps employers by giving them tax credits for hiring workers who face barriers to employment has been reauthorized and expanded to include more workers.

"The federal Work Opportunity Tax Credit (WOTC) has recently eased some of the requirements for the program, expanding the categories of workers it can help to find employment, which gives employers a larger pool of potential workers from which to select and qualify for the tax credit," Keith W. Cooley, director of the Department of Labor & Economic Growth, said.

WOTC offers a range of tax credits from $2,400 to $9,000 for each worker an employer hires from the nine categories of workers covered by the program.

"WOTC is a win-win for both the employer and the worker," Cooley said. "It helps workers to find jobs, while helping employers to reduce their federal tax burden."

Changes made to WOTC
With WOTC's reauthorization by Congress and the President this year, the program will cover qualified new hires made through August 31, 2011. In addition, several significant changes have been made to expand the program including: 

• Expanding the veteran target group to assist those with service-rated disabilities of 10 percent or greater 
• Expanding the age range for food stamp recipients to include 18 to 39 year olds 
• Dropping the high-risk youth target group and adding designated community residents who are 18 to 39 year olds and living in Detroit's Empowerment Zone/Renewal Community (RC), Flint's RC or the Rural Renewal Counties of Gogebic, Marquette and Ontonagon 
• Ending the income verification requirement for the ex-felon target group 
• Ending the Welfare to Work Tax Credit program and adding its target group - recipients of long-term Temporary Assistance to Needy Families (TANF) - to WOTC 
• Increasing the time in which the employer can apply for the credit from 21 days to 28 days after the new hire's start date

To qualify for the WOTC, the employer must employ the worker for at least 120 hrs during the first year of employment in order to claim a 25 percent credit, or at least 400 hours to claim a 40 percent credit for the first year.

The maximum amount of gross wages used to determine the tax credit varies depending on the worker's target group. For disabled veterans, gross wages are capped at $12,000; for long-term welfare/TANF recipients, gross wages are limited to $10,000; for summer youth, gross wages are restricted to $3,000; and for all other target groups, the gross wages are capped at $6,000.

When employers hire a long-term TANF recipient; they can claim a 50 percent tax credit on the first $10,000 of gross wages paid in the worker's second year of employment. As a result, hiring and keeping a long-term TANF recipient employed for two years can produce a $9,000 federal tax credit for employers.

The WOTC is available to private-for-profit employers who hire from the nine targeted groups of workers that typically experience difficulty in finding employment. The groups are: 

• Short-term TANF recipients 
• Long-term TANF recipients 
• Veterans either receiving Food Stamps or having a service-rated disability of 10 percent or higher 
• Food Stamp recipients, ages 18 to 39 
• Vocational rehabilitation work plan participants 
• SSI recipients (supplemental security income) 
• Ex-felons convicted or released within one year of hire 
• Designated Community* residents, ages 18 to 39 
• Summer youth, 16-17, living in an EZ, RC or RRC and who perform services from May 1 - Sept. 15

*Michigan's "designated communities" include an Empowerment Zone (EZ) and a Renewal Community (RC) in Detroit; an RC in Flint; and the Rural Renewal Counties (RRC) of Gogebic, Marquette and Ontonagon. To claim the credit, employers and workers must complete two forms - IRS form 8850 (Prescreening Notice & Certification Request for the Work Opportunity Credit) and ETA form 9061 (Individual Characteristics Form).

Both forms must be submitted to the state's Unemployment Insurance Agency (UIA), WOTC Unit, no later than 28 days from the worker's start date. UIA administers the program in Michigan and certifies that eligible workers qualify employers for WOTC.

Employers wanting more information and the program forms can call the agency's WOTC Unit toll-free number 1-800-482-2959 or use the Quick Link to WOTC from UIA's website (www.michigan.gov/uia).

Read more Michigan Department of Labor & Economic Growth press releases.