The Work Opportunity Tax Credit: A Federal Business Tax Credit for Iowa’s Employers
The Work Opportunity Tax Credit (WOTC ) is a federal tax credit available to employers who hire eligible individuals from target groups with significant barriers to employment. Each year across the United States, employers claim more than $1 billion in tax credits under the WOTC program.
WOTC reduces an employer’s cost of doing business by decreasing their federal income tax liability between $2,400.00 and $9,600.00 per employee, depending on the target group identified and hours worked during the first year of employment. For employers to earn a WOTC , the new employee must work at least 120 hours during the first year of employment and have not worked previously for the employer. Employers can claim the WOTC on an unlimited number of qualified employees each year. The U.S. Department of Labor (DOL) has tax credit specific information for businesses on the WOTC site.(If you have difficulty opening the WOTC link in Internet Explorer, please use Google Chrome.)
Eligible Target Groups for the WOTC
The WOTC is available to employers who hire individuals from eligible target groups including:
- Temporary Assistance to Needy Families recipients
- Supplemental Nutrition Assistance Program recipients
- Residents of Designated Rural Renewal Counties in Iowa which include Adair, Adams, Appanoose, Audubon, Butler, Calhoun, Cass, Cherokee, Clay, Clayton, Emmet, Floyd, Franklin, Fremont, Hancock, Humboldt, Ida, Keokuk, Kossuth, Montgomery, Osceola, Palo Alto, Pocahontas, Poweshiek, Sac, Taylor, Union, Wayne, Winnebago and Worth
- Individuals referred from Vocational Rehabilitation
- Supplemental Security Income (SSI) recipients
- Long-term Unemployment Recipients
How Businesses Apply for the WOTC
- Complete page 1 of IRS Form 8850 by the day the job offer is made.
- Complete page 2 of IRS Form 8850 after the individual is hired.
- Complete ETA Form 9061 after the individual is hired.
Submit the completed and signed IRS and ETA forms to the appropriate state workforce agency within 28 calendar days of the new employee's start date. For Iowa applications see the below instructions.
Iowa WOTC Applications
The preferred method for submitting applications is to use Iowa’s Online WOTC system. All supporting documentation should be emailed to firstname.lastname@example.org when using the online system. For batch or bulk uploading of WOTC applications to the Iowa system, please use this file layout.
However, businesses can also mail or fax applications and supporting documentation to the following locations:
200 Army Post Road, Suite 44
Des Moines, IA 50315
The target group determination for applications is made by the state workforce agency and provided to the employer either electronically or by mail depending on how the application was submitted. The determination will indicate one of the following:
- the employee is certified as meeting the eligibility for one of the WOTC target groups
- the employee is denied because they did not meet the eligibility for a target group
- the state workforce agency needs additional supporting documentation in order to make a determination
After the employee is certified, the business may file for the tax credit with the IRS. For more information on how to file for the tax credit with the IRS, please consult your tax professional or review Frequently Asked Questions and Answers on the IRS website.
Work Opportunity Tax Credit Coordinator
Iowa Workforce Development
Division of Workforce Services