Fill Out Form 5884: Work Opportunity Tax Credit

To take advantage of the credits and deductions available through Form 5884, you must complete the form and attach it to your tax return. The form can be found on the IRS website or by filling out a copy from this page.
Form 5884 Work Opportunity Credit applies to businesses that employ people who have consistently faced barriers to employment, including ex-felons, United States Armed Forces veterans, long-term unemployed individuals, and certain types of Supplemental Security Income (SSI) recipients.

Before filling out Form 5884 Work Opportunity Tax Credit, ensure you have all the information regarding your targeted group employees’ eligibility for this credit. This way, you can make sure you’re filing accurately and not missing out on any potential credits.

Why Use Form 5884

The Form 5884 Work Opportunity Tax Credit (WOTC) is a federal tax credit designed to provide businesses with an incentive to hire individuals from certain targeted groups who have experienced significant levels of unemployment.

The credit can be claimed for wages paid to employees or household members in a qualified year, and depending on the size of the business, this credit can be as much as $9,600 per employee on qualified wages.

Businesses eligible for this credit include employers in the private sector, a tax-exempt organization, tribal governments, and state and local governments.

Before jumping right into filling out the form, you’ll want to make sure you have all of your information on hand. This includes records regarding the employee being hired, payroll information, and a general overview of when they started their job and how long they’ve been employed. Knowing this information ahead of time can save you time and energy when figuring out the ins and outs of the form.

Who Can Use Form 5884: Work Opportunity Credit

Form 5884 is used by employers to claim credits for hiring individuals from targeted groups. These groups include veterans, those receiving food stamps or Supplemental Nutrition Assistance Program (SNAP) benefits, recipients of Temporary Assistance for Needy Families (TANF), recipients of Supplemental Security Income (SSI) due to a physical or mental disability, and former felony offenders.

In addition to declaring which target group an employee falls into, employers must have fully completed information about their own business, such as the legal name and address, Federal Employer Identification Number (FEIN), date of incorporation/organization, net income before taxes and the total amount of wages paid during the qualified year.

Qualified veterans

Fill out the form if you have an employee who is a qualified veteran of the Armed Forces of the United States. They must provide additional information, such as their military discharge papers and dates of active duty service.

People with physical or mental disability

If you have an employee with a physical or mental impairment that hinders their ability to work, and they have been referred by an agency offering rehabilitation services after completing those services or while in the process of receiving them, then you may be eligible to claim the credit from this targeted group.

Public welfare benefit recipients

If you have a new employee who receives unemployment benefits under a state or local public welfare program, you can use Form 5884 to qualify for this tax credit. You must provide information about the employee’s status as a recipient of aid and the type of program under which they receive money.

Convicted individuals

If you hire someone who has been convicted of a felony and released from prison, or placed on parole or probation during the qualified year, then you may be eligible to claim this tax credit. The employee must provide evidence of their conviction, parole, or probation.

FAQ About Form 5884

A qualifying veteran is one who has served at least 90 days active duty in either the US Armed Forces or Reserves; has been discharged or released under conditions other than a dishonorable discharge; OR has worked at least six months out of 12 immediately preceding hire date if separated service member was unemployed longer than 6 months.

Generally speaking, Social Security disability insurance (SSDI) recipients should not be classified as part of any target group on Form 5884 since they do not meet eligibility requirements. They can be considered for tax credits using other forms if applicable.

Yes, it does. Employers may receive an opportunity tax credit when hiring from any of the abovementioned target groups even if the employee works part-time in excess of 120 hours per calendar year. However, it’s important to note that employers must pay at least $6,000 in wages over two years for these employees to qualify for a total WOTC benefit amount when filing their taxes.

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