The IRS today released an advance version of Notice 2016-40 that provides additional relief for employers claiming the work opportunity tax credit (WOTC) for certain employees.
Notice 2016-40 [PDF 185 KB] expands and extends by three months, the transition relief previously provided by Notice 2016-22, for meeting a 28-day deadline. Notice 2016-40 applies to employers that:
Provisions enacted in late 2015 as part of the “Protecting Americans from Tax Hikes Act of 2015” (the PATH Act):
Notice 2016-22 [PDF 163 KB]—issued by the IRS in March 2016—provided additional time for employers to comply with the provisions under the PATH Act. The March 2016 notice extended the WOTC retroactively for 2015 for members of targeted groups and the creation of a new targeted group “qualified long-term unemployment recipients” and extended the time to file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with designated local agencies (that is, additional time was provided for employers that hired or hire members of targeted groups between January 1, 2015, and May 31, 2016).
Employers that hired or hire members of a targeted group, including long-term unemployment recipients, who begin work for that employer on or after June 1, 2016, were not eligible for the transition relief with respect to any such new hire.
According to today’s IRS notice, the IRS and Treasury Department (along with the Labor Department) are aware that employers need additional time to comply with the certification requirements for employees in targeted groups. Accordingly, the transition relief originally provided by Notice 2016-22, to file Form 8850, is extended so that:
Notice 2016-40 states that an employer that hires a member of a targeted group—including a long-term unemployment recipient—who begins work for that employer on or after September 1, 2016, is not eligible for the transition relief with respect to any such new hire.
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