The Work Opportunity Tax Credit (WOTC)
A federal credit that rewards employers for hiring from groups that face barriers to employment - worth up to $9,600 per eligible new hire.
In a nutshell
- WOTC pays employers up to $9,600 per eligible new hire from targeted groups (veterans, SNAP recipients, long-term unemployed, and more).
- The credit is a percentage of the new hire's first-year wages, scaling with hours worked.
- Critical deadline: you must submit IRS Form 8850 within 28 days of the employee's start date - miss it and the credit is forfeited entirely.
- WOTC is currently awaiting congressional reauthorization, but filing 8850 on time preserves your eligibility for retroactive credits once it's renewed.
- P.A.I.D. automates the 28-day deadline so you never forfeit a claim.
What is WOTC?
The Work Opportunity Tax Credit encourages employers to hire people who have historically faced barriers to work. When you hire someone from a targeted group, the federal government gives you a credit based on a portion of that employee's first-year wages.
Targeted groups include, among others:
- Qualified veterans (including disabled and long-term unemployed veterans - the highest credit tier)
- SNAP (food stamp) recipients
- Long-term unemployment recipients
- TANF recipients
- Ex-felons, designated community residents, and vocational rehab referrals
How much is it worth?
How the rate scales
An employee who works at least 400 hours earns you the full 40% rate on qualified wages. Between 120 and 399 hours, the rate is 25%. Under 120 hours, no credit.
The 2026 Hiatus Strategy - don't lose your eligibility
WOTC is periodically allowed to lapse while Congress reauthorizes it. During a hiatus, you can't claim the credit yet - but the clock on each new hire is still ticking.
Regardless of the reauthorization status, you must submit IRS Form 8850 (the pre-screening notice) to your state workforce agency within 28 days of the employee's start date. Filing on time preserves your eligibility to claim the credit retroactively once Congress renews it.
Miss the 28-day window and the credit for that hire is forfeited entirely - there is no way to recover it.
How P.A.I.D. helps
Automated 28-day deadline tracking
Every new hire starts a countdown. P.A.I.D. tracks the Form 8850 deadline for each employee and alerts you well before it closes - so a missed window never quietly forfeits a $9,600 credit.
Eligibility preserved through the hiatus
We help you file 8850 on time during the reauthorization gap, so the moment WOTC is renewed, your retroactive credits are intact and ready to claim.
The mistakes that cost the most
- Assuming you can't do anything during the WOTC hiatus - when in fact you must still file Form 8850 within 28 days to preserve eligibility.
- Pre-screening new hires too late, blowing the 28-day deadline.
- Not pre-screening at all, so eligible hires are never identified.
Do you qualify? The real limits
The bright-line tests and the things that quietly disqualify a business (2026 tax year).
What can disqualify you
- Relatives, anyone owning >50% of the business, and rehires are excluded.
- Fewer than 120 hours worked = no credit.
- Federally subsidized on-the-job-training and strike-replacement wages don't count.
Common reasons businesses get denied
- Missing the 28-day Form 8850 filing deadline - eligibility is permanently lost.
- No certification issued by the state workforce agency.
- The hire is a relative, a >50% owner, or a rehire (all excluded).
- The employee worked fewer than 120 hours (no credit below that).
- 2026 hiatus - the credit's authority has lapsed, so it isn't claimable today (see below).
Even if you qualify
- LEGISLATIVE HIATUS: WOTC authority expired 12/31/2025 and is not reauthorized as of mid-2026 - not a claimable 2026 credit today. Keep filing 8850 within 28 days to preserve eligibility if Congress reinstates it (historically retroactive).
- Nonrefundable for taxable employers; tax-exempts claim only for veterans against payroll tax (Form 5884-C).
Check your state
State figures as of June 2026; many are indexed and change mid-year. Confirm with your state labor department and CPA.
Limits that apply to every federal credit
- They're nonrefundable
- Every credit here offsets income tax but can't create a refund (§38 liability limit). A business with little or no tax liability gets little benefit this year - unused amounts carry back 1 year and forward up to 20 (§39).
- Related businesses are combined
- If you own multiple businesses under >50% common control, the IRS treats them as ONE employer for the size tests (§52/§414). Several small entities can together blow past the under-25-FTE, 30-employee, or 100-employee ceilings even though each looks small alone.
- No double-dipping
- The deduction for the wages/premiums/expenses behind a credit is reduced by the credit amount (§280C), and the same dollar can't fund two different credits.
- Pass-through & passive limits
- For S-corps and partnerships the credit flows to owners on a K-1, where each owner's liability and passive-activity limits (§469) decide how much they can actually use.
Plain-English summary, not tax advice. Your CPA confirms eligibility for your specific business.
Want to know what this is worth for your business?
See whether your recent hires qualify - and let us guard the 28-day Form 8850 deadline for you.