Key Takeaways
- Yes, the WOTC applies if you hire someone before December 31, 2025.
- You must submit IRS Form 8850 to your State Workforce Agency (SWA) within 28 days of the new employee’s start date.
- The credit can be worth up to $2,400 per eligible employee, and for certain qualified veterans, up to $9,600.
- If you can’t use the entire credit to offset your 2025 tax liability, you can carry it back one year or forward for 20 years.
Year-end (arguably a very hectic period in your business) is also the make-or-break season for securing tax savings.
And here’s a powerful year-end hiring incentive: the Work Opportunity Tax Credit.
Claiming it could mean up to $2,400 worth of tax savings per qualifying employee (and even more for certain veterans) that you can reinvest in your North Texas business next year.
But it can only be captured if you act during the hiring process, not after.
What is the Work Opportunity Tax Credit?
Basically, it’s the IRS’s way of rewarding you for giving certain job seekers who face significant barriers to employment (like veterans, long-term unemployed workers, or recipients of public assistance) a chance to work and earn income.
You can receive a tax credit worth up to 40% of the first $6,000 in qualified wages paid to an employee who works at least 400 hours during their first year on the job. That makes the maximum standard credit per qualifying hire $2,400.
Even a December hire can qualify — as long as they meet the hour thresholds and you complete certification within the 28-day deadline.
If the employee works fewer hours (between 120 and 399), the credit goes down to 25% of the first $6,000 in wages. For certain targeted groups, such as qualified veterans, the credit can bump up as high as $9,600 per employee, depending on their length of unemployment or disability status.
There’s no limit on how many employees you can claim. And if your tax bill isn’t large enough to use it all this year, you can carry the unused portion back one year or forward 20 years.
Does the Work Opportunity Tax Credit apply if I hire someone before year-end?
Here’s the short version: Yes. Hiring before December 31st can qualify you for the Work Opportunity Tax Credit, but timing is everything.
The IRS gives you exactly 28 days from the employee’s start date to submit Form 8850, the Pre-Screening Notice and Certification Request, to your State Workforce Agency SWA. Miss that window, and you forfeit the credit.
Also, the Work Opportunity Tax Credit itself is authorized only through December 31, 2025, under current law. (Sure, Congress has extended it several times before, but we can’t assume that’ll continue forever.)
So, if you’re making November or December hires, you’ll need to have pre-screening and paperwork completed as part of your onboarding process. Not afterward.
Who qualifies for the Work Opportunity Tax Credit?
You don’t have to memorize these, but these are the groups that will qualify for the credit (something to note when hiring):
– Qualified veterans
– Recipients of long-term family assistance (TANF) or food stamps (SNAP)
– Ex-felons
– Designated community residents (specific high-unemployment areas)
– Vocational rehabilitation referrals
– SSI recipients
– Long-term unemployed individuals (27+ consecutive weeks)
– Qualified summer youth employees (for certain seasonal hires)
What do I need to do before year-end to claim the Work Opportunity Tax Credit?
If you’re hiring in your Dallas County business before December 31st, here’s your immediate action list:
1. Complete and sign the Pre-Screening Notice and Certification Request with the applicant before or on the day of the offer.
2. Submit that form and ETA Form 9061 (from the Department of Labor) to your state within 28 days of the start date.
3. Track hours worked. You’ll need at least 120 hours to qualify for any credit.
4. Assign responsibility for filing and tracking to one person on your team (or your payroll provider). Missing the 28-day deadline is the #1 reason small businesses lose this credit.
5. Retain documentation for everything, from screening forms to state certification letters.
.jpg)
FAQs
“Can I still claim the credit if I forgot to file Form 8850 within 28 days?”
Unfortunately, no. The IRS treats the 28-day deadline as a hard cutoff. No extensions.
“Does the employee need to know they’re being screened for WOTC?”
Yes. The applicant must sign Form 8850 acknowledging the pre-screening process.
“Do part-time employees qualify for the Work Opportunity Tax Credit?”
Yes, but the credit is proportional to the hours worked and wages paid. You’ll need at least 120 hours for any credit.
“What if I don’t owe enough tax to use the Work Opportunity Tax Credit?”
The unused portion carries back one year and forward 20 years. It’s a long-term benefit, not a use-it-or-lose-it deal.
“Does the Work Opportunity Tax Credit apply to contractors?”
Only W-2 employees qualify. Independent contractors do not.
Final thoughts
If you’ve got year-end hires on deck, it’s worth taking a few minutes to see if any might qualify for the Work Opportunity Tax Credit. Even one eligible hire can make a real difference in your bottom line.
And yes, the paperwork can feel tedious when you’re already juggling so much. So, if you don’t want to shoulder it all on your own, we’re here. If you’d like a quick review or help setting up a simple WOTC process, you can grab a time on my calendar here: