Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a federal income tax benefit administered by the U.S. Department of Labor (DOL) for employers who hire individuals from specified target populations. WOTC reduces a business’s federal tax liability, serving as an incentive to select job candidates who may be disadvantaged in their efforts to find employment.

The main objective of this program is to enable individuals to become employed, earn a steady income and become contributing taxpayers. WOTC joins other workforce programs that help provide incentives for workplace diversity and improve access to good jobs for American workers.

Employers are eligible for a tax credit when hiring individuals with specified barriers to employment identified as target groups. TWC will verify for employers which target group applies. Tax credits currently are available for hires in the following categories:

Veterans

Non-Veterans

When a WOTC application is denied, if the employer has documentation to indicate that the application was eligible for certification, the employer may request that the claim be reconsidered for a specific target group. If you would like to request a claim reconsideration, please provide the documentation listed below for the applicable target group. All requests for reconsideration must include supporting documentation in order to be processed. Please include the WOTC claim/control number listed on the denial letter or denial report. Reconsideration requests must be submitted within the one-year required retention period for denials based on original data.

Veteran Target Groups (includes disabled veteran and unemployed veteran)

• Applicant’s DD-214 (record of military service)
• Rating letter (provides service-connected disability rating required for disabled veterans)

No unemployment documentation is necessary. Texas’ WOTC unit will verify the "unemployment" requirements for disabled veterans and unemployed veterans.

Ex-Felon

• Court documentation indicating felony conviction; or
• If a federal conviction, parole/probation officer information including name and phone number

Designated Community Resident

• Documentation to verify address (e.g., a current utility bill, telephone bill, or driver license) indicated on IRS Form 8850

Vocational Rehabilitation

• Individualized Plan for Employment (IPE) documentation indicating open date, close date, and/or last date of service
• Vocational counselor information including name and phone number

Long-Term Unemployment Benefits

• Submission of ETA Form 9175, Long-Term Unemployment Recipient Self-Attestation Form – Work Opportunity Tax Credit (WOTC) Program

Out-of-State Benefits

If you have information that indicates the applicant received TANF, Supplemental Security Income, SNAP benefits, or unemployment benefits from another state, please provide the name of the state, and the Texas WOTC unit will submit an out-of-state request to the indicated state.

Mail request and supporting documentation to:

Texas Workforce Commission
Attn: WOTC Unit
101 East 15th Street, Room 252T
Austin, TX 78778

The tax credit amount under the WOTC program depends on employee retention. For most target groups, WOTC is based on qualified wages paid to the employee for the first year of employment. The credit to for-profit employers is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours, and 40% for those employed 400 hours or more. The credit to non-profit employers is 16.25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours, and 26% for those employed 400 hours or more. For Long-Term Family Assistance recipients, WOTC is based on a two-year retention period.

Veterans

Non-Veterans

TEGL Guidance

TEGL No. 25-15 Change 1 states that as a postmark date on/after April 12, 2017, SWAs may ONLY issue the ETA Form 9063- (OMB No. 12050371) Employer Certification Form for all WOTC target groups only if submitted on ETA forms (Revised May 2016) with OMB Control Number 1205-0371 and IRS Form 8850 (Revised March 2016) with OMB Control Number 1545-1500.

• IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit
• Instructions for Form 8850
• ETA Form 9061, Individual Characteristics Form
• TWC Form 1098, Application for Refund of Taxes Paid to the State of Texas
• ETA Form 9175, Long-Term Unemployment Recipient Self-Attestation Form 
• ETA Form 9198, Employer Representative Declaration Form
• IRS Form 2848, Power of Attorney and Declaration of Representative
  • Note: An employer may continue to authorize an individual to represent them for WOTC purposes using IRS Form 2848 until May 31, 2024. At that time all 2848s will terminate and ETA Form 9198 is required.