WOTC: The complete employer's handbook.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit paid to employers who hire from groups that face barriers to employment. It's one of the largest, most underused credits in the U.S. tax code — and it's earned on hires you're already making.
What is the WOTC?
WOTC is a federal tax credit administered by the IRS and the U.S. Department of Labor. It rewards employers for hiring individuals from designated target groups — typically between $2,400 and $9,600 per qualifying hire, depending on the group, hours worked, and first-year wages.
The credit is claimed against the employer's federal income tax liability. Tax-exempt organizations can claim it against payroll taxes for veteran hires.
Who qualifies (target groups)
WOTC applies to hires from ten targeted groups. The maximum credit per hire depends on the group and, in most cases, on hours worked and wages paid.
Scroll the table sideways to see the amounts.
| Target group | Maximum credit |
|---|---|
| Long-term family assistance recipient | Up to $9,000 over two years |
| Qualified veteran | Up to $9,600 |
| Qualified IV-A (TANF) recipient | Up to $2,400 |
| SNAP (food stamp) recipient | Up to $2,400 |
| Designated community resident | Up to $2,400 |
| Vocational rehabilitation referral | Up to $2,400 |
| Ex-felon | Up to $2,400 |
| Supplemental Security Income (SSI) recipient | Up to $2,400 |
| Long-term unemployment recipient | Up to $2,400 |
| Summer youth employee | Up to $1,200 |
Veterans have several sub-categories with different limits; $9,600 is the top tier. Most other groups max out at 40% of qualified first-year wages up to $6,000.
How much is the credit worth?
The credit is calculated as a percentage of qualified first-year wages:
- 25% of qualified wages for employees who work at least 120 hours.
- 40% of qualified wages for employees who work at least 400 hours.
- Maximum credit ranges from $2,400 for most groups up to $9,600 for certain disabled veterans.
How to file for WOTC
IRS Form 8850 and supporting ETA forms must be submitted to your State Workforce Agency within 28 days of the employee's start date. Late submissions are denied — even if the hire would have qualified.
- Pre-screen on or before the job offer. The applicant completes IRS Form 8850, Page 1 before or on the day of the job offer.
- Complete Form 8850, Page 2 after hire and gather supporting documentation (ETA Form 9061 or 9062).
- Submit to your State Workforce Agency (SWA) within 28 days of the employee's start date. Late submissions are denied.
- Certification. The SWA reviews and issues a certification confirming the employee qualifies.
- Claim the credit on IRS Form 5884 with your federal income tax return (or Form 5884-C for tax-exempt organizations claiming for veterans).
The most common ways employers lose the credit
- Screening after the job offer instead of on or before it.
- Missing the 28-day SWA submission window.
- Incomplete Form 8850 or missing supporting ETA forms.
- Assuming a CPA is screening every new hire — most aren't.
How Finrock handles WOTC end-to-end
Finrock runs the screening, gathers supporting documentation, files with the State Workforce Agency inside the 28-day window, and tracks each certification through to the credit on your return. You get a certified dollar figure — not an estimate — and your team spends no time on the paperwork.
Find out what you're owed.
We'll look at your hiring and tell you the real dollar figure — no obligation.