The popular Federal Work Opportunity Tax Credit (WOTC) has been partially expanded to include entities that are tax-exempt under Code Section 501(c) and 501(a). Tax-exempt entities that qualify may take the reduced tax credit against their employer share of social security tax.
The federal tax credit is available to employers that hire and retain employees from certain targeted groups. For tax-exempt organizations, the employees that qualify for the WOTC must be veterans who were hired during 2014.
Normally, when claiming the credit, employers must file a pre-screening and certification form within 28 days of an employee’s hire to be able to claim the credit. With the late extension of the credit under the Tax Increase Prevention Act of 2014, employers may retroactively apply for the credit for employees hired during 2014. The required pre-screening and certification Form 8850 is due no later than April 30th, 2015.
Once the required certification for the qualifying veteran is received, tax-exempt employers may file Form 5884-C Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans to claim the credit against their social security tax.