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Small Business and Work Opportunity Tax Credit

The Small Business and Work Opportunity Tax Act of 2007 extends the WOTC Tax Credit through August 31, 2011.

The WOTC promotes the hiring of individuals who qualify as a member of a target group and provides a Federal tax credit to employers who hire these individuals.

Individuals who are in one of the following nine target groups may qualify an employer for the WOTC:

  1. Qualified veterans receiving Food Stamps or qualified veterans with a service-connected disability who: have a hiring date which is not more than one year after having been discharged or released from active duty; or have aggregate periods of unemployment during the one-year period ending on the hiring date that equal or exceed six months.

  2. Qualified recipients of Temporary Assistance to Needy Families (TANF);

  3. Designated Community Resident who is an individual who has attained age 18 but not 40 on the hiring date who reside in an Empowerment Zone, Renewal Community or Rural Renewal County.

  4. Vocational rehabilitation referrals, including Ticket holders with an individual work plan developed and implemented by an Employment Network;

  5. Qualified summer youth ages 16 through 17 who reside in an Empowerment Zone, Enterprise Community or Renewal Community;

  6. Qualified Food Stamp recipients ages 18, but not 40, on the hiring date;

  7. Qualified recipients of Supplemental Security Income (SSI);

  8. Long-Term Family assistance recipients; and

  9. Ex-felons hired no later than one year after conviction or release from prison.

Under Federal Tax Credit Amounts and Retention Periods, the employee must be retained 400 hours or a 40 percent tax credit on qualified first year wages up to $6,000. For the employee who is retained at least 120 hours, but less than 400 hours, a 25 percent tax credit is available on qualified first-year wages up to $6,000. (The qualified summer youth target group)

The tax credit is based on qualified first year wages up to $3,000. Qualified wages (for disabled veterans only) was increased from $6,000 to $12,000.

Additional information may be accessed on the U.S. Department of Labor Employment and Training web site.