The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced challenges in finding employment—including individuals with past criminal involvement.
WOTC joins other workforce strategies that incentivize workplace diversity and facilitate access to good jobs for American workers. Participating employers are able to reduce their income tax liability by receiving a tax credit that ranges from $1,200 to $9,600, depending on the employee hired.
As an employer, your first step is to make a written request to your state workforce agency (SWA), certifying that your designated candidates/employees are members of a target group that qualifies for the credit.
After the required certification is secured, taxable employers claim the tax credit as a general business credit against their income tax. The process for taxable employers claiming the WOTC remains the same.
For additional information, see:
Form 5884 (with instructions)
Form 3800 (PDF)
Instructions for Form 3800
- Your business’s related income tax return and instructions (i.e., Forms 1040, 1041, 1120, etc.)
Or visit the Internal Revenue Service’s Work Opportunities Tax Credit Frequently Asked Questions and Answers for additional information.
You should also note that many state and local governments offer tax credits and other incentives to employers who hire formerly incarcerated individuals. You can check with your State and Local Revenue Departments for additional information and instructions on their process as well.