Work Opportunity Tax Credit (WOTC) Podcast Narrative Vaune Shelbourn Host Bret Anderson Subject Matter Expert/Guest VAUNE SHELBOURN - Hello, I am Vaune Shelbourn, the Director of the National Veterans Training Institute. Welcome to our podcast on the Work Opportunity Tax Credit, better known as WOTC. Before we get started and before I introduce our guest, I want our listeners to know what we have placed a WOTC Fact Sheet that goes along with this program on the WOTC podcast site. If you are listening to this at your computer, you can download those now if you wish, or if you are enjoying this on your I- pod or in your car, you can refer to those at a later time. There is a lot of information and resources that goes along with this benefit and we want you to be aware of those and that they are available to you. Fair enough? I am joined with Bret Anderson, who is the Training Team Leader at the National Veterans Training Institute and is our resident expert on veterans issues. Bret is here to discuss the Work Opportunity Tax Credit, or WOTC, basically to give us a brief explanation of what WOTC is, and how it works, but mainly, how this program specifically impacts veterans. Thanks Bret, for being here with us. Bret Anderson my pleasure. VAUNE SHELBOURN: So with that, Bret. can you tell us what WOTC is? Bret Anderson You bet. The Work Opportunity Tax Credit is a federal tax credit created in 1996, and it s a benefit that is available to all private sector businesses, no matter the size. It was basically designed as an incentive for employers to create jobs and training opportunities for disadvantaged individuals who consistently experience high rates of unemployment. Now, this is due to a variety of employment barriers, such as lack of job skills, felony record, and so on).
The Tax Credit, I m going to refer to it as simply WOTC, since it is such a mouthful, is designed to assist 12 targeted groups of job seekers, to help them obtain gainful employment, so that they may acquire the skills and experience needed to be eligible for better, high paying job opportunities. So, it s a Win-Win situation for targeted job seekers AND their prospective employers. By taking advantage of the WOTC program, an employer, first and foremost fills their staffing needs with these job seekers, and at the same time can reduce its federal tax liability. VAUNE SHELBOURN: So employers can really benefit from this? Bret Anderson: Absolutely. That s why it s important to get this information out to the field, because those WOTC payroll tax savings can then be used to offset the high costs of hiring and training new workers. And it s had its successes. For instance, during Fiscal Year 2007, over 633,000 certifications were issued by state workforce agencies, and this figure has been growing every year. VAUNE SHELBOURN That s terrific. So, who can take advantage of this program? Bret Anderson That s a good question! It is important to point out that the WOTC can only be claimed by an employer for newly hired employees who must not have worked for that employer anytime in the past. In addition, other people who cannot be in this program are relatives, dependents of the company or be a majority owner of the business. And it s important to point out that this tax credit will be only be available for targeted groups of job seekers who first start working on or before August 31, 2011. VAUNE SHELBOURN; So, you previously mentioned that there were 12 targeted groups that can qualify their employers for the WOTC. And the majority of the people listening to this podcast are DVOP s and LVER s. So, for their information, how many of those groups specifically focus on veterans? 2
Bret Anderson - Okay, three of the 12 targeted groups focus on veterans with specific characteristics. They are 1. Qualified veterans receiving Food Stamps; 2. Second, Qualified veterans with a service connected disability; and, 3. Third, Unemployed veterans. VAUNE SHELBOURN So first, for WOTC purposes. We probably need to know what the definition of a veteran is. Bret Anderson Yes, agreed. For this category, the definition for veteran is the one found in Section 51 of the Internal Revenue Code, which states that a veteran is, an individual who Served on active duty for a period of more than 180 days, or Was discharged or released from active duty for a service-connected disability. VAUNE SHELBOURN Okay, so now let s focus on the three specific groups of veterans who qualify for WOTC. They again are; qualified veterans who receive Food Stamps, qualified disabled veterans and unemployed veteran? Can you go into more detail about these three targeted groups? Bret Anderson You bet... Let me first cover the two qualified veteran categories. The category that includes qualified veterans from families receiving food stamps has been part of WOTC for many years, but the Small Business and Work Opportunity Tax Act of 2007 expanded this category to include disabled veterans. What makes the hiring of qualified disabled veterans more attractive to employers, is that the maximum allowable tax credit based upon the qualifying wages paid to disabled veterans was raised from $6,000 to $12,000. VAUNE SHELBOURN: Okay, so double? Bret Anderson: Right. Now, to be included in either of the qualified veteran categories one must, of course, meet the veteran definition I just mentioned. Then, to be eligible for 3
a tax credit under the first qualified veteran category, the veteran must be a member of a family that received food stamps for at least a 3-month period during the 15-month period ending on the hiring date. VAUNE SHELBOURN: This is the hiring date that the person who is brought on by the company who will receive the WOTC tax credit, correct? Bret Anderson: That s correct. To be eligible for the second, or qualified disabled veteran category a veteran must meet two criteria. First, the veteran must be entitled to compensation for a service-connected disability. In other words, who receives payments from the Department of Veterans Affairs for their service connected disability. Then, the disabled veteran must meet either one of two additional criteria. The first is to be hired by the employer claiming the tax credit within one year of discharge or release from active duty. The second, or alternative criterion is to have been unemployed for at least six of the twelve months prior to the hiring date by the employer claiming the credit. VAUNE SHELBOURN - Okay, so essentially the qualified veterans category includes either an eligible Veteran whose family has received food stamps or a veteran who has a service-connected disability, right? Bret Anderson That is basically correct. And that leads us to the third targeted veteran group, which was just added by Congress, that being the unemployed veteran. VAUNE SHELBOURN : I have some statistics here that I want to point out to our audience, and you ll see why the unemployed veteran was added to this category. According to labor force statistics -- In March of 2008 the number of veterans who were unemployed was 525,000 for a 4.2 percent unemployment rate. By March 2009, the unemployment rate for veterans had increased from 4.2 percent to 8.6 percent, a year later. That means the number of unemployed veterans had jumped from 525,000 to over one million (1,000,000) veterans! Almost double. And eight months later, at the 4
end of November 2009, the veteran unemployment rate stood at 8.5 percent and the number of unemployed veterans was still over one million. Bret Anderson Yes, that is a huge jump And it is clear that it has not started to come down yet. VAUNE SHELBOURN: Exactly, and what is important about these statistics is that those individuals are not being ignored by lawmakers. Bret Anderson Right, and because of such a high unemployment rate, Congress added this third category of veterans, the unemployed veteran, to qualify for the WOTC as part of The American Recovery and Reinvestment Act (ARRA), enacted by the President in February, 2009. VAUNE SHELBOURN - So, who qualifies as a member of the Unemployed Veteran group once it is established that he or she is a veteran by definition? Bret Anderson In the case of this category, veterans who meet the WOTC definition for veteran are required to meet two additional criteria. First, they must have been discharged or released from active duty at any time during the 5-year period ending on the hiring date. Second, they must have received Unemployment Insurance benefits for at least four weeks during the one-year period ending on the hiring date. VAUNE SHELBOURN Okay, so there seems to be a lot of criteria and categories our listeners may becoming confused with or having a hard time following. For this purpose we have put a Fact Sheet on the WOTC podcast section, so you can refer to it at anytime. Bret Anderson - Good idea. This can get a bit confusing at times. VAUNE SHELBOURN: So, what type of documentation is required to verify a person as an unemployed veteran? 5
Bret Anderson Okay, first, it is necessary to determine if the individual satisfies the definition of a Veteran. For veterans, they had to have served on active duty for a period of more than 180 days, and must have been discharged or released from active duty in the U.S. Armed Forces at a time during the 5-year period ending on the hiring date: For proof, they would need to have their DD-214, or Discharge papers. Or they would need to show they have been discharged or released from active duty for a service-connected disability. They would need the Form Letter 21-802 certification Issued ONLY by Department of Veterans Affairs. That certifies a veteran s serviceconnected disability. VAUNE SHELBOURN : We ll put all that info also on the Fact Sheet. Bret Anderson; So, for the unemployed veteran, the documentation they would need to qualify them as unemployed is proof that they have received UI benefits paid to the individual during the one year measurement period. This would be a person s Unemployment Insurance Claims Record. VAUNE SHELBOURN Okay, good. So, can you now discuss the amount of the tax credit that is available to employers through the WOTC? Bret Anderson - I sure can. The amount of the tax credit varies by target group. If the targeted veteran works for an employer for at least 400 hours, that s 50 8-hour days, and then the employer gets a 40 percent tax credit of each veteran s first year wages up to $6,000. If the individual works less than 400 hours but at least 120 hours, then the employer receives a 25 percent tax credit that is available on qualified first year wages, again up to $6,000. Now, this figure doubles for a veteran with a service-connected disability. So the amount of covered wages is $12,000 instead of just $6,000, as I just indicated. 6
VAUNE SHELBOURN - So, in a condensed version, converting the math, the benefit amounts that are available for veterans are: up to $2,400 for qualified, and Unemployed Veterans and $4,800 for Disabled Veterans. Bret Anderson That is correct! VAUNE SHELBOURN So, the next question our listeners should have, would then be how do the employers, who I work with, apply for the WOTC? Can you give us some information on that? Bret Anderson - Yes, the employers will need to complete two forms. The first is a Pre-Screening Notice and Certification Request from the IRS, Form 8850. *The other is ETA Form 9061 which is the Individual Characteristics Form. This form is available either locally through State Workforce Agency offices or through a link to the Employment Training Administration s website at www.doleta.gov Employers would need to fill those out and submit them back to the State Workforce Agency with ORIGINAL signatures and dates (sorry, there s just no exceptions on that.) VAUNE SHELBOURN And now, once again both the forms themselves and instructions for filling these out can also be found on the podcast link to a site that anyone, even your employers can access. So, I m sure a few more questions may have come to mind while listening to this discussion. One may be, for which tax years can the tax credit be applied? Bret Anderson - Well, employers may claim the Work Opportunity Tax Credit for a total of two years. Employers who do not take the full credit amount for a given year because of the tax liability limitation may carry back one year or forward 20 years. VAUNE SHELBOURN - Anything else you would like to add? 7
Bret Anderson - Well, only that since the WOTC may be seen as complicated, there are a lot of resources and information that individuals can find on the web. VAUNE SHELBOURN And several such websites have been placed onto this podcast site. We have put the narrative form of this conversation on our podcast link as well as more information on WOTC to include the targeted groups, and different forms and resources available to job-seekers, employers and particularly those workforce development professionals who are listening to this podcast and their colleagues. Ok, well thank you Vaune. That really clears up some of our questions! Bret Anderson: My pleasure Vaune Shelbourn: And thank you, our audience, for listening to our WOTC podcast. We hope this information was helpful to you. Remember to check out the podcast link to find all of the contact information and resources you need in relation to this WOTC podcast. Please look for more podcast productions on this web site. If you have comments or questions regarding this, or any podcast or any questions you have regarding NVTI, please do not hesitate to ask. We ask you to fill out the evaluation for this podcast and so we can continue to bring you podcasts and resources to assist you in your job. And if you have a suggestion for a podcast topic you want to hear, please let us know. We want to be of assistance in anyway we can. Thanks for listening! 8