NLMBDA outlines federal hiring tax credit
The National Lumber and Building Material Dealers Association (NLBMDA) issued a notice that reminds members there are federal tax credit opportunities when it comes to hiring new employees.
Here is how the NLBMDA breaks down how dealers can receive a Work Opportunity Tax Credit:
With many businesses facing a tight job market, NLBMDA would like to remind members of a valuable federal tax credit available to employers for hiring long-term unemployment recipients and other groups of workers facing significant barriers to employment.
The Work Opportunity Tax Credit is a long-standing tax benefit that encourages employers to hire workers certified as members of any of 10 targeted groups facing barriers to employment. With millions of Americans out of work at one time or another since the pandemic began, the IRS notes that one of these targeted groups is long-term unemployment recipients who have been unemployed for at least 27 consecutive weeks and received state or federal unemployment benefits during part or all of that time. The WOTC is available for wages paid to certain individuals who begin work on or before December 31, 2025.
The other groups include certain veterans and recipients of various kinds of public assistance, among others.
Specifically, the 10 groups are:
- Temporary Assistance for Needy Families (TANF) recipients,
- Unemployed veterans, including disabled veterans,
- Formerly incarcerated individuals,
- Designated community residents living in Empowerment Zones or Rural Renewal Counties,
- Vocational rehabilitation referrals,
- Summer youth employees living in Empowerment Zones,
- Supplemental Nutrition Assistance Program (SNAP) recipients,
- Supplemental Security Income (SSI) recipients,
- Long-term family assistance recipients, and
- Long-term unemployment recipients.
Qualifying for the Credit:
To qualify for the credit, an employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency (SWA). It must be submitted to the SWA within 28 days after the eligible worker begins work. Employers should not submit Form 8850 to the IRS.
Claiming the Credit:
Eligible businesses then claim the WOTC on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment. This is a one-time credit for each new hire and an employer cannot claim the WOTC for employees who are rehired.
The credit is first figured on Form 5884, Work Opportunity Credit, and then claimed on Form 3800, General Business Credit.