HR Compliance

WOTC Transition Relief Date Extended

By

Paycom Leadership

| Jun 28, 2016

Here’s some good news for Work Opportunity Tax Credit (WOTC) employers: On June 17, the IRS issued a notice offering additional transition relief for employers claiming the WOTC. Notice 2016-40 extends the transition relief previously provided by Notice 2016-22 by three months, to Sept. 28.

The updated notice provides guidance and additional time for employers who:

  • Hired or hire members of targeted groups (other than long-term unemployment recipients) on or after Jan. 1, 2015, and on or before Aug. 31, 2016.
  • Hired or hire members of the new targeted group of qualified long-term unemployment recipients on or after Jan. 1, 2016, and on or before Aug. 31, 2016.

Background

Notice 2016-40 provides the transition relief for employers claiming the WOTC under Sections 51 and 3111(e) of the Tax Code as extended and amended by the Protecting Americans from Tax Hikes Act of 2015, commonly referred to as the PATH Act. The first notice providing transition relief, Notice 2016-22, came in March.

The PATH Act, passed by Congress in December 2015, amended the Tax Code to extend the WOTC through Dec. 31, 2019. This act also amended the Tax Code to expand the targeted groups (employment of individuals who may qualify an employer for a credit listed in the statute) to include qualified long-term unemployment recipients.

A qualified long-term employment recipient is any individual who – on the day before the individual begins work for the employer, or, if earlier, the day the individual completes Form 8850 – is in a period of unemployment that is not less than 27 weeks and includes a period (which may be less than 27 weeks) in which the individual received unemployment compensation under state or federal law.

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