Who qualifies for the Work Opportunity Tax Credit (WOTC)?

Employers can earn WOTC tax credits by hiring individuals from nine target groups: Qualified IV-A (TANF) Recipients, Qualified Veterans, Qualified Ex-Felons, Designated Community Residents, Vocational Rehabilitation Referrals, Summer Youth Employees, Supplemental Nutrition Assistance Program (SNAP) Recipients, Supplemental Security Income (SSI) Recipients, and Long-Term Unemployment Recipients.

How much can employers save through the WOTC program?

Employers may receive a tax credit of up to $9,600 per eligible new hire, depending on the employee’s target group, hours worked, and wages earned. The credit directly reduces the employer’s federal income tax liability.

How can employers claim the Work Opportunity Tax Credit?

To claim the WOTC, employers must pre-screen job applicants using IRS Form 8850 before extending a job offer, submit certification requests to their state workforce agency within 28 days of the new hire’s start date, and claim the credit on their business tax return once certification is received.

What are the benefits of participating in the WOTC program?

The WOTC program provides employers with substantial tax savings, helps build a diverse and inclusive workforce, supports community development, and demonstrates a company’s commitment to corporate social responsibility and equitable hiring practices.

Why was the WOTC program created?

The Work Opportunity Tax Credit was established in 1996 to encourage employers to hire individuals who face barriers to employment, such as veterans, individuals with disabilities, or those receiving public assistance. The program helps reduce unemployment, promote self-sufficiency, and strengthen local economies.

Has the WOTC program changed over time?

Yes. Since its inception in 1996, the WOTC program has evolved through periodic extensions and updates. The most recent major change was the addition of the Long-Term Unemployment Recipient category in 2016, expanding eligibility to more job seekers.

How does the WOTC benefit communities?

The WOTC program supports community growth by reducing unemployment, promoting financial independence, and decreasing reliance on public assistance programs. It helps local economies thrive through increased workforce participation and reduced poverty rates.

Where can employers learn more about the WOTC program?

Employers can learn more about the Work Opportunity Tax Credit by visiting the IRS and U.S. Department of Labor websites or by consulting with a qualified tax professional or WOTC specialist to understand eligibility, certification, and claiming processes.

Comprehensive Guide to Nine Target Groups of WOTC

Q: What is the Work Opportunity Tax Credit (WOTC)?

The Work Opportunity Tax Credit (WOTC) is a federal hiring incentive program that provides tax credits to employers who hire individuals from specific target groups facing barriers to employment. Administered by the IRS and the U.S. Department of Labor, the WOTC allows employers to claim up to $9,600 per qualified employee depending on eligibility and employment duration.

The Work Opportunity Tax Credit (WOTC) is a federal tax incentive that rewards employers for hiring individuals who face barriers to employment. Established in 1996, the WOTC program encourages businesses to expand their workforce by providing opportunities to underrepresented groups—ultimately promoting economic growth, diversity, and community development.

Employers can earn substantial tax credits by hiring workers from the nine WOTC target groups, each designed to help individuals achieve self-sufficiency while reducing reliance on public assistance programs.

What Is the Work Opportunity Tax Credit (WOTC)?

The WOTC is a federal hiring incentive program jointly administered by the IRS and the U.S. Department of Labor. It provides a tax credit of up to $9,600 per qualified employee, depending on the target group and length of employment. This program benefits both employers—through reduced tax liability—and job seekers, who gain access to meaningful work opportunities.

The Nine WOTC Target Groups

Qualified IV-A Recipient (TANF Recipient)
Who Qualifies: Individuals receiving Temporary Assistance for Needy Families (TANF) for at least 9 months within the past 18 months.
Purpose: Encourages the transition from public assistance to long-term employment.
Qualified Veteran
Who Qualifies: Veterans receiving SNAP benefits, with service-connected disabilities, or unemployed for at least 4 weeks.
Purpose: Supports veterans’ transition to civilian work and reduces veteran unemployment.
Qualified Ex-Felon
Who Qualifies: Individuals hired within one year of conviction or release from incarceration.
Purpose: Promotes second-chance employment and helps reduce recidivism.
Designated Community Resident (DCR)
Who Qualifies: Individuals aged 18–39 living in Empowerment Zones, Renewal Communities, or Rural Renewal Counties.
Purpose: Stimulates job growth and economic development in underserved areas.
Vocational Rehabilitation Referral
Who Qualifies: Individuals with disabilities referred through a state or federal rehabilitation program.
Purpose: Increases workforce diversity and inclusion of individuals with disabilities.
Summer Youth Employee
Who Qualifies: Youth ages 16–17 residing in Empowerment Zones and employed between May 1 and September 15.
Purpose: Provides early work experience and promotes youth employment.
Supplemental Nutrition Assistance Program (SNAP) Recipient
Who Qualifies: Individuals aged 18–39 from families receiving SNAP benefits.
Purpose: Helps low-income individuals achieve financial independence through employment.
Supplemental Security Income (SSI) Recipient
Who Qualifies: Individuals receiving SSI benefits during the 60-day period before hire.
Purpose: Encourages workforce participation among individuals with limited income and resources.
Long-Term Unemployment Recipient
Who Qualifies: Individuals unemployed for 27 or more consecutive weeks and who received unemployment compensation.
Purpose: Reduces long-term unemployment and supports economic recovery.

Benefits of the WOTC Program for Employers

Significant Tax Savings: Receive up to $9,600 per eligible new hire.
Diverse Workforce: Build a more inclusive and socially responsible workplace.
Community Impact: Reduce unemployment and strengthen local economies.
Corporate Social Responsibility (CSR): Demonstrate a commitment to hiring practices that promote equity and opportunity.

WOTC Program Impact and Evolution

Since its introduction, the Work Opportunity Tax Credit program has proven to be a cornerstone of federal efforts to promote employment among disadvantaged populations. The addition of the Long-Term Unemployment Recipient category in 2016 further expanded opportunities for job seekers who face extended joblessness. Through periodic extensions and bipartisan support, the WOTC continues to be a vital tool for economic empowerment and workforce diversity.

How to Claim the WOTC Tax Credit

Employers must:

Pre-screen applicants using IRS Form 8850 before making a job offer.
Submit certification requests to their state workforce agency within 28 days of the new hire’s start date.
Claim the credit on their business tax return once certification is received.

Conclusion: Reduce Taxes While Improving Communities

The Work Opportunity Tax Credit (WOTC) offers employers a powerful way to reduce tax liability while making a measurable difference in their communities. By understanding the nine WOTC target groups and leveraging WOTC optimization, businesses can expand their workforce, support economic inclusion, and contribute to a stronger, more resilient economy.

Ready to take advantage of WOTC and start saving on your hiring costs? Don’t miss out on valuable tax credits that reward your business for making a difference. Contact Rockerbox today to discover how simple optimizing WOTC can be for your business.

Your Guide to WOTC and Its Nine Target Groups