The Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WtW) Tax Credit are Federal programs designed to help people move from economic dependency to self-sufficiency by providing an incentive to employers in the private sector to hire from among several groups of job seekers who have consistently had the most difficulty in securing employment. This incentive is in the form of a substantial credit against income taxes owed to the Federal government.

In Kentucky, the Office of Employment and Training (OET) has primary responsibility for administering the WOTC and WtW Tax Credit programs. Questions about the programs should be addressed to Barbara Gilley, State WOTC Coordinator, or other staff assigned to the WOTC program at 502-564-7456. Requests for certification (IRS Form 8850) and other program forms should be mailed to Ms. Gilley at: Office of Employment and Training, Division for Field Services, 275 East Main St., 2W-A, Frankfort, KY 40621. Requests for certification must be mailed within 21 days of the employee's first day on the job.


Work Opportunity Tax Credit:

The WOTC program is administered by the Office of Employment and Training. This program provides Federal tax credits to encourage employers to hire job seekers with barriers to employment from eight targeted groups. Those eligible for the WOTC program include certain welfare, food stamp, and Supplemental Security Income (SSI) recipients; people with disabilities; veterans; ex-felons, and young people who live in federally-designated empowerment zones, enterprise communities and renewal communities.

The amount of the tax credit varies depending upon wages paid to and the number of hours worked by the eligible employee. For each WOTC eligible employee who works 400 hours or more, the employer may claim a tax credit equal to 40% of the first $6000 of qualified wages paid, except in the case of Qualified Summer Youth Employees, for whom the tax credit is equal to 40% of the first $3000 of qualified wages paid. For those who work at least 120 hours, employers may claim a tax credit equal to 25% of the first $6000 in qualified wages paid, except in the case of Qualified Summer Youth Employees for whom the tax credit is equal to 25% of the first $3000 in qualified wages paid. An employee must work at least 120 hours in order for the employer to claim any tax credit.


Welfare-to-Work Tax Credit:

The Welfare-to-Work (WtW) Tax Credit is a tax credit for employers who hire individuals certified by DES as long-term recipients of cash welfare assistance, Temporary Assistance to Needy Families (TANF).

The Welfare-to-Work Tax Credit is equal to 35% of the first $10,000 of qualifying wages paid to a certified employee during the first year of employment and 50% of the first $10,000 in qualifying wages paid during the second year of employment, for a maximum $8500 tax credit over a two-year period. In addition, for the WtW Tax Credit, wages may include certain tax-exempt amounts relating to accident and health coverage, educational assistance programs, and dependent care assistance programs, which are not included in the definition of qualifying wages for the WOTC.

The application and certification process for the WtW Tax Credit is the same as for the WOTC. Even the forms (IRS 8850, ETA-9061, ETA-9062, and ETA-9063) are the same. However, in order for the employer to claim the WtW Tax Credit, the employee must work for the employer at least 400 hours or 180 days. The WtW Tax Credit is coordinated with the WOTC so that employers may claim both tax credits for the same individual, but not in the same taxable year.

Unemployment Tax Credit