The Internal Revenue Service (IRS) recently issued Notice 2009-28 offering guidance on the Work Opportunity Tax Credit (WOTC) under §51 of the Internal Revenue Code of 1986 (IRC). Under the American Recovery and Reinvestment Act of 2009 or ARRA, unemployed veterans and disconnected youth were both added as members of a targeted group for purposes of the WOTC.

IRC §51 defines veteran, unemployed veteran, and disconnected youth. According to Notice 2009-28 a veteran is someone:

1. Having served on active duty (other than active duty for training) in the Armed Forces of the United States (Armed Forces) for a period of more than 180 days; or
2. Having been discharged or released from active duty in the Armed Forces for a service-connected disability.

Notice 2009-28 also reiterates that an unemployed veteran is someone “certified by the designated local agency” as:

1. Having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and
2. Being in receipt of unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.

According to Notice 2009-28, a disconnected youth is defined as “any individual who is certified by the designated local agency” as:

1. As having attained age 16 but not age 25 on the hiring date;
2. As not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date;
3. As not regularly employed during such 6-month period; and
4. As not readily employable by reason of lacking a sufficient number of basic skills.

Notice 2009-28 also defines “not regularly attending any secondary, technical, or post-secondary school”, “not regularly employed”, and “not readily employable by reason of lacking a sufficient number of basic skills”.

“Not regularly attending any secondary, technical, or post-secondary school” is defined as someone who “states in writing that during the six months preceding his or her hiring date, he or she has not attended a secondary, technical or postsecondary school for more than an average of 10 hours per week, not counting periods during which the school is closed for scheduled vacations.” For this purpose, a secondary school is either “a secondary school as defined in 20 USC §7801(38); or a for-profit secondary school that otherwise meets the definition in 20 USC §7801(38).”

“Not regularly employed” is defined as someone who “during each consecutive three-month period within the six months preceding his or her hiring date, the individual earned less than an amount equal to the gross amount he or she would have been paid at the [higher of the federal or applicable state] minimum wage if he or she worked 30 hours every week during the three-month period.”

“Not readily employable by reason of lacking a sufficient number of basic skills” is defined as someone who “states in writing that he or she does not have a certificate of graduation from a secondary school or a GED Certificate” or someone who “states in writing that he or she has a certificate of graduation from a secondary school or a GED Certificate that was awarded no less than 6 months preceding his or her hiring date and has not held a job or been admitted to a technical school or post-secondary school since receiving the certificate.”

In order to receive the WOTC, an employer is generally required to obtain certification on or before the day the individual begins work or to complete Form 8850 on or before the date employment is offered and to submit Form 8850 within twenty-eight days from when the individual starts employment. Notice 2009-28 provides transitional relief for employers hiring unemployed veterans or disconnected youth after December 31, 2008 and before July 17, 2009. Employers will be eligible as long as Form 8850 is submitted to the designated local agency before August 18, 2009.

Contact Vision Payroll if you have any questions on Notice 2009-28 or the WOTC.