Corrections Community

I am in the process of helping create a non-profit that will help parolees secure employment after release from prison. At a meeting with local businessmen, several local hirers complained that it was almost impossible to get the tax credit, that the process was so obtuse, it was impossible for their tax accountants to get the credits offered. Has anyone else heard this and if so, what is the problem? And how do we resolve it? I've been to the EDD and WOTC sites and the process outlined seems okay. Are there roadblocks in the system or what marketers call breakage...rules and policies that are so restrictive that no one can qualify for the theoretical credit? Thanks you for your help, all!

The application process for WOTC and WtW tax credits is very simple and straighforward. The problem lies with the type of corporation the employer has in place. Certain types of corporations are not able to use these tax credits.

Thanks, Elaine. I'll look into those corporation categories. Do you actually know employers who have received their credits?

We processed 5400 WOTC applications last month in North Carolina. Here is the process for a business to claim the credit: Employers have IRS form 8850 and Dept. of Labor ETA Form 9061 completed when the person is hired. These forms must be submitted to the appropriate state agency within 28 days of hire. Within 45 days the employer will receive a certification if the employee qualifies for the tax credit. At tax time, IRS form 5884, "Work Opportunity Tax Credit" is used to determine the credit amount. This is transferred to IRS form 3800, "General Business Credit" where it is included with other credits the business may receive. Finally, the total from the General Business Credit is transferred either to IRS 1040 (for individuals) or form 1120 (for corporations). The initial paperwork is going to take about 10 minutes, tops. At tax time it will vary by business size, but any accountant should be able to complete the paperwork and claim the credit. Each years business lose out on millions of dollars in credits because they don't know they qualify or they don't bother with the paperwork. It is an excellent incentive that could really help our returning citizens find employment if we get employers to understand its value.

Jim, Thank you for a very complete but simple to understand response! This information will help us a LOT!

Jim, does this apply to all states?

To my knowledge, it does. This is part of a Federal Program and the forms and time lines are the same for every state. Some states and municipalities may have additional credits available. WOTC info is available at http://www.doleta.gov/business/Incentives/opptax/ For a list of State Coordinators go to http://www.doleta.gov/business/Incentives/opptax/pdf/Directory_SWA_WOTC_Coords.pdf

The information as stated above is correct in Arkansas.  At our work release center we have 19 community employers, each one that has chosen to apply for WOTC has been successful.  That program, along with the federally sponsored indemnity bond program are great selling points.