Services Provided and Provider of Services

The Welfare-to-Work Tax Credit is a federal income tax credit that encourages employers to hire long-term family assistance recipients who begin to work any time after December 31, 1997, and before January 2006.

The Welfare-to-Work Tax Credit for new hires employed 400 or more hours or 180 days is 35% of qualified wages for the first year of employment and 50% for the second year. Qualified wages are capped at $10,000 per year. Wages include tax-exempt amounts received under accident or health plans as well as educational assistance and dependent assistance programs.

Employers must apply for and receive certification from their State Employment Security Agency (SESA), also known as the State Workforce Agency (SWA), that their new hire is a long-term TANF/AFDC recipient before they can claim the Welfare-to-Work Tax Credit on their federal tax return.

Eligibility Requirements and Age of Youth Covered

The Welfare-to-Work Tax Credit applies to new hires that begin work after December 31, 2001, and before January 1, 2006, and are employed at least 400 hours or 180 days.

The Long-Term Welfare or Family Assistance Recipient refers to any individual who has been certified by the "designated local agency" as one: a) who is a member of a family that: received Temporary Assistance to Needy Families (TANF), or Aid to Families with Dependent Children (AFDC) for at least the 18 consecutive months before the date of hire; or b) whose TANF/AFDC eligibility expired under Federal or State law after August 5, 1997, for individuals hired within 2 years after their eligibility expired or; c) who received TANF/AFDC for any 18-month period, and who are hired within 2 years after the end of the earliest 18-month period.

Services Provided and Provider of Services

The Work Opportunity Credit provides an incentive to businesses to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. The credit can be as much as 40% to employers for the qualified wages paid to individuals who work for the employer

An individual is not considered a member of a targeted group unless the state employment security agency certifies him or her as a member. This certification requirement can be satisfied in either of two ways:

• On or before the day on which the individual begins work, the employer has received a certification from its state employment security agency that the individual is a member of a targeted group, or
  
• On or before the day the employer offers employment to an individual, he/she completes Form 8850, Pre-Screening Notice, and Certification Request for the Work Opportunity and Welfare-to-Work Credits, and sends it to its state employment security agency no later than the 21st day after the individual begins work.

Those claiming the credit must receive the certification before claiming the credit.

Eligibility Requirements and Age of Youth Covered

At least 18 but not yet 25 for high risk youth (See below) on the hiring date and lives in an empowerment zone, enterprise community, or renewal community; 16-but not yet 18 years for summer youth (See below); 18 but not yet 25 for food stamp recipients.

An individual is a member of a targeted group if he or she is a:

• Qualified recipient of Aid to Families with Dependent Children (AFDC) or successor program;
• Qualified veteran;
• Qualified ex-felon; high-risk youth. (An individual who is at least 18 but not yet 25 on the hiring date and lives in an empowerment zone, enterprise community, or renewal community);
• Vocational rehabilitation referral; qualified summer youth employee. (An individual who performs services for the employer between May 1 and September 15; Has never worked for the employer before, and lives in an empowerment zone, enterprise community, or renewal community);
• Qualified food stamp recipient. (an individual who is at least age 18 but not yet age 25 and is a member of a family that has received food stamps for the 6-month period ending on the hiring date or is no longer eligible for such assistance under section 6(o) of the Food Stamp Act of 1977, but the family received food stamps for at least 3 months of the 5-month period ending on the hiring date. ); or
• Qualified SSI recipient.

NCWD/Youth | c/o Institute for Educational Leadership
4455 Connecticut Avenue NW, Suite 310 | Washington, DC 20008
Telephone: 1-877-871-0744 (Toll Free)
TTY: 877-871-0665 (Toll Free)