The Basic Rule: You Must Hire From a Targeted Group

The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers who hire people from specific groups that face barriers to employment. You claim it on your business tax return, not on a personal return. The credit reduces the taxes your business owes — it does not produce a refund if the credit exceeds your tax liability in most cases.

You do not have to be a certain size of business or operate in a certain industry. A sole proprietor hiring one person from a targeted group can claim it. A large corporation hiring hundreds can claim it. The rule is simple: if you hire someone who belongs to one of the nine targeted groups the IRS recognizes, and you meet the work requirements, you can claim the credit.

The nine targeted groups are: Supplemental Nutrition Assistance Program (SNAP) recipients, Supplemental Security Income (SSI) recipients, long-term family assistance recipients, may have access to veterans, ex-felons, residents of empowerment zones or renewal communities, vocational rehabilitation referrals, summer youth employees, and long-term unemployed individuals. Each group has its own rules about how long the person must have received benefits or been unemployed before you can claim the credit.

Key Takeaways

  • You must hire someone from one of nine targeted groups and have them work for you for a minimum period — usually at least 120 hours over a set timeframe — before you can claim the credit.
  • The IRS Form 8850 must be filed with the person's first federal income tax return, and you must also submit Form 9061 to your state workforce agency within 28 days of hire to pre-screen the person's may be able to access.
  • The credit amount varies by group: most groups earn you $2,400 per person, but may have access to veterans and long-term unemployed individuals can earn up to $9,600 per person depending on hours worked.
  • You cannot claim the credit for hiring a family member, someone you previously employed, or someone you hired before the IRS pre-screened them through the state workforce system.
  • The person must be a new employee — you cannot retroactively claim the credit for someone already on your payroll before you knew about WOTC.

The Nine Targeted Groups and Their Requirements

SNAP recipients must have received benefits for at least three months during the 12-month period before you hire them. SSI recipients must have been receiving benefits when you hired them or within 60 days before. Long-term family assistance recipients must have received Temporary Assistance for Needy Families (TANF) or a state equivalent for at least 18 months immediately before hire, or received it for any 18 months in the past five years and are currently receiving it.

may have access to veterans include those who received unemployment benefits under a federal or state program, or those with a service-connected disability rated by the Department of Veterans Affairs. Ex-felons must have been convicted of a felony and be hired within one year of release from prison or within six months of conviction if they did not serve time. Long-term unemployed individuals must have been unemployed for at least 27 weeks in the past year, or received unemployment benefits for at least four weeks during the past year and be unemployed when you hire them.

Summer youth employees must be between 16 and 17 years old, work during the May-through-September period, and live in an empowerment zone or renewal community. Vocational rehabilitation referrals are people with disabilities referred by a state vocational rehabilitation agency. Residents of empowerment zones or renewal communities must live in a federally designated zone and meet income limits set by the IRS.

Hours Worked and the Minimum Employment Period

For most targeted groups, you must have the person work at least 120 hours for you before you can claim the credit. The hours do not have to be consecutive, but they must occur within a specific timeframe. For SNAP recipients, SSI recipients, long-term family assistance recipients, and vocational rehabilitation referrals, the 120 hours must be completed within the first 12 months of employment.

may have access to veterans and long-term unemployed individuals have a higher threshold: they must work 400 hours within the first 12 months to earn the full credit amount. If they work between 120 and 399 hours, you can still claim a partial credit. Summer youth employees must work at least 120 hours between May 1 and September 15.

The clock starts on the first day the person works for you, not the day you file the paperwork. If someone works 60 hours and then leaves, you cannot claim the credit. If they work 120 hours and then leave, you can claim it based on the hours completed.

The IRS Forms You Must File

You must file IRS Form 8850 (Credit for Employer-Provided Childcare Facilities — actually, this is wrong; the correct form is IRS Form 8850 for WOTC) with the person's first federal income tax return filed after you hire them. This form certifies that the person belongs to a targeted group. You do not file it with your business return; it goes with the employee's personal return, and the employee must sign it.

Before you file Form 8850, you must submit Form 9061 (or Form 9062 in some states) to your state workforce agency within 28 days of the hire date. This is the pre-screening step. The state agency verifies that the person actually belongs to the targeted group you claim. If the state does not pre-screen the person, the IRS will not allow the credit, even if the person genuinely qualifies.

The 28-day window is strict. If you miss it, you lose the credit for that hire. Some states allow online submission; others require paper forms mailed to a specific address. Contact your state workforce agency or the IRS to find the correct submission method and address for your state.

Credit Amounts by Group

The credit amount depends on which targeted group the person belongs to and how many hours they work. For SNAP recipients, SSI recipients, long-term family assistance recipients, vocational rehabilitation referrals, summer youth employees, and residents of empowerment zones, the credit is $2,400 per person if they work at least 120 hours in the first 12 months.

may have access to veterans earn a higher credit: $4,800 if they work at least 120 hours but fewer than 400 hours, or $9,600 if they work at least 400 hours in the first 12 months. Long-term unemployed individuals earn $2,400 for 120 to 399 hours, or $5,000 for 400 or more hours.

These amounts are per person per year. If you hire five SNAP recipients who each work 120 hours, you can claim $12,000 in credits ($2,400 × 5). The credit reduces your federal income tax liability dollar-for-dollar, but it does not carry forward to future years in most cases — you must use it in the year the person completes the hours.

Who Cannot Claim the Credit

You cannot claim the credit if you hire a family member, defined as a spouse, child, parent, or sibling. You also cannot claim it if you hire someone you previously employed, even if they left and came back. The person must be a new hire to your business.

You cannot claim the credit if you hire someone before the state workforce agency pre-screens them. Even if the person genuinely belongs to a targeted group, the IRS requires the pre-screening step. You also cannot claim the credit if you hire someone specifically because they belong to a targeted group and then lay them off after they hit the hour threshold — the IRS considers this tax fraud.

You cannot claim the credit for hiring a person who was already on your payroll before you learned about WOTC. The credit applies only to new hires. If someone has worked for you for two years and then you discover they are a SNAP recipient, you cannot retroactively claim the credit.

How to Start the Process

Contact your state workforce agency or visit the IRS WOTC page to request Form 9061 and instructions specific to your state. Some states have online portals where you can submit the form electronically; others require mailed copies. You will need the new hire's Social Security number, date of birth, and the targeted group category.

Submit Form 9061 within 28 days of the hire date. Keep a copy for your records. Once the state pre-screens the person, you will receive a notice. Then, when the person files their federal income tax return (usually the following year), you and the employee file Form 8850 together. The employee must sign the form; you cannot file it without their signature.

If you have questions about whether a specific person qualifies, contact your state workforce agency before you hire them. They can tell you whether someone's benefits status or employment history meets the WOTC definition. This step is free and can save you from filing paperwork for someone who does not actually may have access to.

Frequently Asked Questions

Can I claim the credit if the person quits after working 100 hours?

No. Most groups require at least 120 hours worked within the first 12 months. If someone leaves at 100 hours, you cannot claim the credit. may have access to veterans and long-term unemployed individuals need 120 hours for a partial credit or 400 hours for the full amount. The hours must be completed before you file the claim.

What happens if I miss the 28-day deadline to file Form 9061?

You lose the credit for that hire. The IRS will not allow the credit without state pre-screening, and the state will not pre-screen after 28 days have passed. Mark your calendar when you hire someone from a targeted group and submit the form immediately.

Do I have to tell the person I am claiming the WOTC credit for them?

You must tell them before you file Form 8850, because they have to sign it. The form is part of their tax return. You do not need to tell them before you hire them, but you do need their cooperation to claim the credit.

Can I claim the credit for hiring someone who is both a may have access to veteran and a SNAP recipient?

No. You claim the credit based on one targeted group per person. If someone qualifies for multiple groups, you choose the group that gives you the highest credit amount and claim based on that group only.

What if the state says the person does not may have access to after I have already hired them?

You cannot claim the credit. If the state pre-screening comes back negative, the person does not belong to a targeted group under WOTC rules, even if you believe they do. You can ask the state to reconsider, but the IRS will follow the state's information.