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IRS highlights business tax credits

With many North Dakota businesses facing a tight job market, the Internal Revenue Service reminds employers to check out a valuable tax credit available to them for hiring long-term unemployment recipients and other groups of workers facing significant barriers to employment.

During National Small Business Week, which took place from Sept. 12-18, the IRS highlighted tax benefits and resources designed to help new and existing small businesses. For any business now hiring, the Work Opportunity Tax Credit (WOTC) may help.

Legislation enacted in December extended the WOTC through the end of 2025. This long-standing tax benefit encourages employers to hire workers certified as members of any of 10 targeted groups facing barriers to employment. One of these targeted groups is long-term unemployment recipients who have been unemployed for at least 27 consecutive weeks and have received state or federal unemployment benefits during part or all of that time.

The other groups include certain veterans and recipients of various kinds of public assistance, among others.

To qualify for the credit, an employer must first request certification by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to the North Dakota Department of Workforce Development.

Eligible businesses claim the WOTC on their federal income tax return. It is generally based on wages paid to eligible workers during the first year of employment. The credit is first figured on Form 5884, Work Opportunity Credit, and then is claimed on Form 3800, General Business Credit.

Though the credit is not available to tax-exempt organizations for most groups of new hires, a special rule allows them to claim the WOTC for hiring qualified veterans. These organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations.

For more information about the Work Opportunity Tax Credit, visit IRS.gov/WOTC.

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