Source: http://www.dllr.state.md.us/employment/wotc.htm

The Work Opportunity Tax Credit (WOTC), authorized by the Small Business Job Protection Act of 1996 (P.L. 104-188), is a federal tax credit that encourages employers to hire eight targeted groups of job seekers by reducing employers’ federal income tax liability by as much as $2,400 per qualified new worker; $750, if working 120 hours or $1,200, if working 400 hours or more, per qualified summer youth. The credit has been authorized through December 31.

Qualifications

WOTC applies only to new employees hired after on/or after January 1, 2002, and before December 31, 2003. The new employee must belong to one of eight target groups:

• AFDC Recipients: Individual must have received this benefit, for any 9 months within the most recent 18 months, ending on the hiring date.
  
• Veterans: Must be a person who has served on active duty in the U.S. Armed Forces for a period of more than 180 days, or was discharged or released from active duty for a service-connected disability, and a member of a family that received food stamps for a period of 3 months during the most recent 15 months ending on the hiring date.
  
• Ex-Felons: Must be a person convicted of a felony under any Federal or state law, and must meet the following qualifications:
  • A member of a family that had an annual income of 70% or less of the Bureau of Labor Statistics lower living standard during the 6 months preceding the month the income determination occurs or the month in which the hiring date occurs
  • Hire date not more than one year after the conviction or release from prison for that felony.
    
• High-Risk Youth: Must be between 18 and 25 years of age on the hiring date, and living within the Empowerment Zone or Enterprise Community. Federal Empowerment Zones in Maryland are located within Baltimore City. There are no Federal Enterprise Communities in Maryland.
  
• Vocational Rehabilitation Referral: Must be a person having a disability which results in a substantial barrier to employment, and must have been referred to an employer after completing or while receiving rehabilitation services according to an individualized written rehabilitation plan under the state plan for vocational rehabilitation services or vocational rehabilitation program for veterans.
  
• Summer Youth: Must be a person who performs work for the employer between May 1st and September 15th AND meets all of the following qualifications. Between the ages of 16 and 17 on the hiring date (or by May 1st of the year involved) or has not worked for the employer before, AND lives within a Federal Empowerment Zone or Enterprise Community.
  
• Food Stamp Recipient: Must be a person who is at least 18 but not yet 25 years of age AND must be a member of a family receiving assistance under a food stamp program for the 6 months ending on the hiring date OR that received food stamp for at least 3 months of the last 5 months ending on the hiring date, but is no longer receiving them.
  
• Supplemental Security Income (SSI) Recipient: Must be a person receiving SSI benefits for any month during the 60 days preceding the date of hire.
  

Employer Incentives

The Employer may

• Claim an unlimited number of employees.
• Claim the tax credit along with Maryland’s Employment Opportunity Tax Credit (EOC), Disability Employment Tax Credit (MDETC), and Enterprise Zone tax credits if the employee is qualified.

Restrictions

• The credit is not available for certain relatives of employers, or for rehired workers who were not certified during their previous employment.
• The employer may not claim the tax credit for an employee on an on-the-job training contract, but credit may be claimed for wages paid after the OJT contract has expired. The employee must have been qualified for the WOTC before the starting date. The time spent with the employer doing on-the-job training qualifies the employer toward fulfilling the retention period.

How to Apply

1. Complete the one page IRS Form 8850 (Pre-Screening Notice & Certification Request Form) when the job offer is made. The form, signed by both the applicant and the employer, must then be sent to DLLR with a postmark on or before the 21st day of employment. This form is used to determine whether an applicant appears to fall into an eligible target group for the tax credit and to formally request that the Maryland State Department of Labor, Licensing, and Regulation (DLLR) certify the applicant’s eligibility. The form should be presented to the employer on the day of the applicant’s job offer, interview, or prior to the interview.
   
   You can download the form, with instructions, from www.irs.ustreas.gov, www.irs.ustreas.gov/formspubs/index.html, or call 1-800-829-1040.
   
2. Complete either the Individual Characteristics ETA Form 9061 or Form 9062. You can download ETA form 9061 from www.irs.ustreas.gov/formspubs/index.html and ETA form 9062 from www.umez.org/ETA9062.pdf.

• If the new employee has already been conditionally certified as belonging to a WOTC target group, complete the bottom part of Form 9062.
• If the new employee has not been conditionally certified, the employer and/or the new employee must fill out and complete, sign and date Form 9061.

3. Mail both signed forms to the :
   
   Department of Labor, Licensing and Regulation
   Tax Credit Program Administrator
   1100 N. Eutaw Street, Room# 201
   Baltimore, MD 21201
   
4. The Employer Certification Form (481-B) is issued by DLLR following review of the appropriate above documents. This form constitutes final certification of a candidate’s eligibility for the WOTC program. Keep this certification as proof of credit eligibility.
   
5. To obtain the tax credit, employers should submit IRS Form 5884 when filing their federal tax returns. You can download this form from http://www.irs.gov/ or order it by calling 1-800-TAX-FORM.

For More Information Contact:

Department of Labor, Licensing and Regulation
David J.Ghee-Tax Credit Program Administrator
1100 N. Eutaw Street Room 201
Baltimore, MD 21201
Telephone: 410-767-2080 or 410-767-2047
E-mail: ghee@careernet.state.md.us