Work Opportunity Tax Credit: What Tax Pros Should Know Before It Expires

The IRS has confirmed that the Work Opportunity Tax Credit (WOTC) remains available for employers who hire individuals from certain targeted groups through December 31, 2025. As tax professionals, now is the time to help your clients take advantage of this incentive before it expires. Below is what to watch, strategies to employ, and how to integrate WOTC into your planning.

What Is WOTC + Who Qualifies

• Definition: The WOTC is a federal tax credit employers can claim when they hire people who face barriers to employment.

  
  

• Targeted Groups include:

  1. Formerly incarcerated individuals

  2. Long-term unemployment recipients

  3. SNAP and SSI beneficiaries

  4. Qualified veterans

  5. Designated community residents, summer youth in Empowerment Zones, vocational rehab referrals, etc.

  
  

Key Rules & Deadlines

• Hire by December 31, 2025: WOTC only applies to employees who begin work on or before this date.

• Pre-certification required: Employers must submit IRS Form 8850 (Pre-screening Notice and Certification Request) to their state workforce agency within 28 days after the eligible employee begins work. Missing this deadline can disqualify the credit.

• Claiming: After certification, eligible employers use Form 5884 (Work Opportunity Credit) and include it on Form 3800 (General Business Credit) in their tax returns. Tax-exempt employers also have special rules, especially for qualified veterans.

  
  

How Much Credit Can Employers Get

• Credit rate depends on hours worked in the first year: 25% of qualified wages if the employee works 120–399 hours. 40% if the employee works 400 hours or more.

• Maximum wages eligible: Generally up to $6,000 of wages for most target groups, leading to a maximum potential credit of about $2,400 per eligible hire. For certain veterans, eligible wages can be higher, allowing credit amounts to reach up to $9,600.

  
  

Strategies for Tax Professionals

1. Proactive hiring conversations: If you have business clients hiring staff soon, advise them to prioritize hires who may qualify under WOTC. Even in Q4 of 2025, this can yield savings.

2. Streamlined documentation practices: Ensure HR/staff know to complete Form 8850 & other required certification steps promptly (within the 28-day window). Maintain accurate records to support the target group status.

3. Model the benefit now: Run projections to show clients what the tax savings would be for different types of hires, particularly if hiring from target groups with higher credit potential (veterans, etc.).

4. Coordinate with state workforce agencies: Some of the certification steps are handled at the state level. Encourage clients to understand how state SWA handles processing, turnaround times, and required forms.

5. Align with other tax credits/incentives: Ensure that wages used for WOTC are not double‐used for other wage-based credits. Being precise here avoids issues with IRS or labor / workforce agency audits.

   
   

What to Tell Clients

• If they’re hiring before end of 2025, WOTC is still a valid way to reduce tax liability.

• For employers who haven’t yet used WOTC processes (pre-screening, certification), time is short—delay reduces ability to secure the credit.

• Keep employers informed about this expiring deadline, especially if they are planning staffing or hiring in early 2026: once the “hire date” passes 12/31, 2025, WOTC is no longer available.

  
  

Final Thoughts

The Work Opportunity Tax Credit remains a powerful tool—but it’s one with a deadline. For tax professionals, this is an opportunity to provide value by helping clients claim credits they might otherwise miss. Acting now—with well-organized processes and early hiring strategies—can deliver meaningful savings.

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Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.