What the Work Opportunity Tax Credit actually does

The Work Opportunity Tax Credit (WOTC) is a federal tax credit that reduces what an employer owes in federal income taxes when they hire someone from a group the government wants to encourage into employment. The employer claims the credit on their tax return, not the worker. The credit is worth between $1,200 and $9,600 per new hire, depending on which group the person belongs to and how long they stay employed.

The credit does not give money directly to job seekers. Instead, it lowers the employer's tax bill as an incentive to hire people who face real barriers to work — such as people leaving the criminal justice system, long-term unemployed workers, veterans, people receiving certain public benefits, or people with disabilities. The employer must meet specific requirements to claim it, and the hiring must happen within a set window.

This is a real tax benefit that employers use, but it is not something a job seeker can claim themselves or that changes how they are hired. Understanding how it works helps you know whether your employer might have claimed it when you were hired, and what that means for your employment record.

Key Takeaways

  • The Work Opportunity Tax Credit reduces an employer's federal tax bill when they hire someone from a targeted group, with the credit ranging from $1,200 to $9,600 depending on the hire.
  • The employer must obtain a completed IRS Form 8850 and a state-issued WOTC certificate before they can claim the credit on their tax return.
  • You must work for the employer for a minimum number of hours — usually 120 hours in the first year — for the employer to receive the full credit amount.
  • The targeted groups include people with felony convictions, veterans, people receiving TANF or SNAP, people with disabilities, and long-term unemployed workers, among others.
  • Being in a targeted group does not change your hiring process, pay, or job duties — the credit is purely a tax benefit for the employer.

The nine targeted groups that may have access to for the credit

The IRS recognizes nine categories of workers. An employer can claim the credit only if the person hired falls into one of these groups. The groups are: individuals with a felony conviction; recipients of Supplemental Nutrition Assistance Program (SNAP) benefits; recipients of Temporary Assistance for Needy Families (TANF); individuals with a disability who are referred by a vocational rehabilitation agency or the Department of Veterans Affairs; veterans who received unemployment benefits under a federal program; long-term unemployed individuals; recipients of Supplemental Security Income (SSI); summer youth employees (ages 16–17) from low-income families; and recipients of certain other public benefits.

The employer must verify that you fall into one of these groups before they can claim the credit. This usually happens through documentation you provide during hiring — such as a letter from your state showing you receive SNAP, a discharge paper showing your veteran status, or a referral letter from a disability services agency. The employer then files Form 8850 with the IRS within 28 days of your hire date.

Being in one of these groups does not mean you will be hired or that you will receive different treatment on the job. The credit is an incentive for employers, not a may provide of employment or a change to your rights as an employee.

How employers claim the credit and what paperwork is required

The employer must complete IRS Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) and file it with the IRS within 28 days of your hire date. This form asks for your name, Social Security number, hire date, and which targeted group you belong to. The employer also needs you to complete a questionnaire about your background so they can determine which group applies.

After the IRS receives Form 8850, they issue a WOTC certificate to the employer. The employer then uses this certificate when filing their federal tax return to claim the credit. If the IRS denies the certificate, the employer cannot claim the credit, even if they hired you and you worked there for the required hours.

You do not file anything yourself or sign the tax credit claim. The employer handles all the paperwork. Your role is to answer the background questions honestly and provide documentation if the employer asks for it — such as proof of veteran status, a benefits letter, or a referral from a disability agency.

How long you must work for the employer to may have access to

The amount of credit the employer receives depends on how many hours you work in your first year of employment. For most targeted groups, the employer gets the full credit only if you work at least 120 hours in the first 12 months. If you work between 30 and 119 hours, the credit is reduced. If you work fewer than 30 hours, the employer receives no credit.

For some groups — such as long-term unemployed workers and certain veterans — the threshold is higher: you must work at least 400 hours in the first year for the employer to claim the maximum credit. The employer knows these rules and factors them into their hiring decisions, but the hours requirement does not change your job or your pay.

If you leave the job before reaching the hour threshold, the employer's credit is reduced or eliminated. This is between the employer and the IRS, and it does not affect your employment record or your right to unemployment benefits if you are laid off.

The credit amounts and how they vary by group

The credit ranges from $1,200 to $9,600 per hire. The exact amount depends on which targeted group you belong to and how many hours you work. For most groups, the credit is $2,400 if you work at least 120 hours, and $1,200 if you work 30 to 119 hours. For veterans and long-term unemployed workers, the credit can reach $4,800 or $9,600 if they work the higher hour thresholds.

These amounts are set by federal law and do not change based on your salary, location, or the size of the employer. A small business and a large corporation receive the same credit for hiring someone from the same targeted group, as long as the hour requirements are met.

The credit reduces the employer's federal income tax liability dollar-for-dollar. It does not reduce payroll taxes or state taxes, and it does not affect your wages or benefits.

When the employer must file and what happens if they miss the deadline

The employer must file Form 8850 with the IRS within 28 days of your hire date. This is a strict deadline. If the employer misses it, they lose the right to claim the credit for that hire, even if you worked there for years and met all the hour requirements.

Some employers use a Professional Employer Organization (PEO) or payroll service to handle the filing. In those cases, the service is responsible for meeting the deadline. If the service fails to file on time, the employer still loses the credit.

You will not know whether your employer filed on time unless you ask them directly. There is no notification sent to you, and it does not appear on your pay stub or tax documents. If you are curious whether the credit was claimed, you can ask your employer's human resources or payroll department.

How this credit affects you as a job seeker or employee

The Work Opportunity Tax Credit does not change how you are hired, what you are paid, or how you are treated on the job. It is purely a tax benefit for the employer. You cannot negotiate for higher pay because the employer is claiming the credit, and the employer cannot pay you less because of it.

Being in a targeted group does not appear on your employment record or your resume. Your employer may know you are in one of these groups because you disclosed it during hiring, but that information is confidential and cannot be used against you. Employers are prohibited from discriminating based on the reason you may have access to for the credit.

If you are job hunting and you know you fall into one of the targeted groups, you can mention it to employers if you think it will help your case — for example, if you are a veteran or you have a disability. But you are never required to disclose it, and employers cannot require you to in order to hire you.

Frequently Asked Questions

Does the Work Opportunity Tax Credit mean I will be paid less?

No. The credit is a tax benefit for the employer and does not affect your wage, benefits, or working conditions. Your pay is set by the employer based on the job and market rates, not on whether they claim a tax credit. The credit cannot be used to justify paying you below minimum wage or less than other workers in the same role.

Will claiming this credit hurt my chances of getting hired?

No. The credit is an incentive for employers to hire people in targeted groups, so it makes you more attractive to hire, not less. Employers cannot use the credit as a reason to discriminate against you or to treat you differently than other employees.

What if my employer did not file the paperwork in time?

If your employer missed the 28-day deadline to file Form 8850, they lose the credit for your hire. This does not affect you or your job. You continue working under the same terms, and your employment record is unchanged. The missed deadline is a tax issue between the employer and the IRS.

Can I claim the Work Opportunity Tax Credit on my own tax return?

No. Only the employer can claim the credit, and only on their business tax return. It does not appear on your personal tax return, and you cannot claim any part of it yourself. The credit is a business expense reduction for the employer, not a benefit you receive directly.

How do I know if I am in one of the targeted groups?

You are in a targeted group if you have a felony conviction, receive or recently received SNAP or TANF, are a veteran who received unemployment benefits, have a disability and are referred by a vocational agency, have been unemployed for a long time, receive SSI, or fall into one of the other categories. Your employer will ask you about this during hiring. If you are unsure, ask your employer's human resources department which group they believe you belong to.