Work Opportunity Tax Credit Program: The 2026 Employer Guide

Everyone deserves a chance to succeed. Unfortunately, hiring systems don’t always reflect that — and when employers are under pressure to fill roles quickly, inclusive hiring can become harder to execute.

For years, the Work Opportunity Tax Credit program helped close that gap by rewarding employers that hired and retained people who have faced significant barriers to employment. But as of Jan. 1, 2026, the program is in a legislative hiatus because its latest authorization expired Dec. 31, 2025. (Translation: You may not be able to claim credits for 2026 start dates unless Congress renews the credit — potentially retroactively.)

This 2026 employer guide explains what the Work Opportunity Tax Credit program is, what the hiatus means, who typically qualifies and the steps employers should continue to take to stay compliant and ready.

What is the Work Opportunity Tax Credit program?

The Work Opportunity Tax Credit program is a federal tax credit available to employers for hiring and employing individuals from certain targeted groups who have faced significant barriers to employment. In practice, it’s a dollar‑for‑dollar reduction of eligible federal tax liability (not a deduction), which can meaningfully lower an employer’s effective tax rate when the required certification and filing steps are completed.

Created in 1996, WOTC has been renewed multiple times as a temporary tax provision, which is why employers periodically face uncertainty around reauthorization.

2026 program status and hiatus overview

WOTC was authorized through Dec. 31, 2025. Unless and until Congress reauthorizes it, the credit is not currently available for employees who began or will begin work after Dec. 31, 2025. Many employers and state workforce agencies are treating 2026 as a hiatus period.

Why this matters: WOTC has lapsed before and later been retroactively reinstated. A well‑known example is 2014, when the credit temporarily expired and was later renewed with retroactive coverage. In these scenarios, employers that kept their screening and paperwork processes running were best positioned to claim retroactive credits once certification determinations resumed.

How the program works in 2026

Even during a lapse, the safest approach is to keep following WOTC’s core compliance rules, so you don’t lose the option to claim credits if the program is renewed retroactively.

For 2026, you should:

• continue screening new hires as part of onboarding (or earlier, during application)
• complete IRS Form 8850 on or before the date a job offer is made
• submit Form 8850 and the supporting ETA form(s) to your state workforce agency within 28 calendar days of the employee’s start date
• retain submission confirmations and related documentation in case credits become claimable later

Important: Without new legislation, businesses generally cannot claim WOTC for workers whose start dates fall in 2026. But continuing to file on time is the best way to preserve eligibility if Congress restores the program.

Eligibility requirements (WOTC target groups)

Historically, the Work Opportunity Tax Credit program eligibility rules focus on whether a new hire is certified as a member of one of 10 targeted groups. Certification is handled through state workforce agencies based on the forms you submit and supporting documentation.

Full list of target groups

Qualified ex-felons

Individuals hired within a year of being convicted of a felony or released from prison.

Qualified IV-A (TANF) recipients

Individuals whose family receives qualifying aid through a state program funded by Part A of Title IV of the Social Security Act (often called TANF).

Long-term family assistance recipients

Individuals whose family has received long-term TANF benefits and who meet program duration rules at the time of hiring.

Qualified veterans

Veterans who meet certain unemployment, disability or benefit-receipt criteria. Some veteran categories have higher wage caps, which can increase the maximum credit.

Designated community residents (DCR)

Individuals ages 18-39 who live in designated Empowerment Zones or Rural Renewal Counties at the time of hire.

Vocational rehabilitation referrals

Individuals with physical or mental disabilities referred to an employer upon completion of qualified rehabilitation services.

Summer youth employees

Individuals ages 16-17 living in an Empowerment Zone who work for an employer between May 1 and Sept. 15.

Supplemental Nutrition Assistance Program (SNAP) benefits recipients

Individuals who receive SNAP benefits and meet age and receipt requirements.

Supplemental Security Income (SSI) recipients

Individuals who received SSI benefits for any month within a 60-day window before the hiring date.

Qualified long-term unemployment recipients

Individuals unemployed for at least 27 consecutive weeks who received unemployment compensation during some or all of that period.

Credit amount ranges ($1,200-$9,600)

Under prior WOTC rules, credits generally ranged from $1,200 up to $9,600 per qualified hire, depending on the targeted group and qualified wages.

*Amounts are based on prior WOTC rules and depend on certification, wages and hours worked. See IRS/DOL guidance and consult a tax professional.

In many cases, the credit is calculated as a percentage of qualified first‑year wages:

• 25% of qualified wages if the employee works at least 120 hours but fewer than 400 hours in the first year
• 40% of qualified wages if the employee works 400 hours or more in the first year

Most targeted groups have a standard first‑year wage cap of $6,000 (which commonly produces a maximum $2,400 credit). Certain veteran categories can have higher wage caps, which is how the maximum can reach $9,600.

Filing requirements

IRS Form 8850 and ETA Form 9061 (28-day rule)

To participate in the Work Opportunity Tax Credit program, employers must prescreen and request certification for each potentially eligible new hire. The process typically includes:

1) IRS Form 8850 — Pre‑Screening Notice and Certification Request

• Completed by the job applicant and employer on or before the day a job offer is made.

2) ETA Form 9061 (or ETA Form 9062, when the candidate has a conditional certification)

• Submitted with Form 8850 to the state workforce agency.

Timing matters. In most cases, employers must submit Form 8850 and the supporting ETA form(s) to the appropriate state workforce agency within 28 days of the employee’s start date. Missing this filing deadline is one of the fastest ways to forfeit the credit.

Certification during the 2026 lapse (employers should continue filing)

When WOTC is in a legislative hiatus, many state workforce agencies will still accept, date‑stamp and retain timely certification requests for 2026 start dates — but may pause certification determinations until Congress reauthorizes the credit.

For employers, the key takeaway is operational: Keep screening, keep submitting and keep your documentation organized. If the program is renewed retroactively, timely submissions can help you avoid missing out on credits that become available later.

How do employers benefit from WOTC?

Hiring from WOTC-eligible groups can pay off in more ways than one. Employers have historically used the credit to offset hiring costs while also expanding access to opportunity for job seekers who might otherwise be overlooked.

Beyond the dollar value, many organizations use WOTC screening as part of a broader talent strategy that supports belonging and engagement, workforce development partnerships, and stronger retention through more intentional onboarding.

How do companies claim WOTC?

Like other tax credits, WOTC can be a boon to qualifying businesses — provided they apply for it correctly and on time. Under prior program rules, the workflow looked like this:

• Screen and prescreen: Integrate WOTC screening into the hiring process so forms are completed at the right moment.
• Submit forms within 28 days: Send Form 8850 and ETA Form 9061/9062 to the appropriate state workforce agency.
• Receive certification: Wait for the state workforce agency to verify the new hire’s targeted-group status.
• Claim the credit: For taxable employers, claim WOTC as a general business credit on your income tax return. For eligible tax‑exempt organizations, claim the credit against payroll taxes (limited to qualified veterans).

If you’re operating during the Work Opportunity Tax Credit program 2026 hiatus, you may still be able to follow the first three steps — even if the final credit cannot be claimed until and unless Congress renews the program.

How to Claim WOTC: A Quick Start Checklist

1. Add a WOTC prescreen question set to your application or onboarding workflow.
2. Complete Form 8850 on or before the offer date.
3. Collect supporting documentation for the targeted group, when applicable.
4. Submit Form 8850 and ETA Form 9061/9062 within 28 days of start date.
5. Track submissions and store confirmations in a central folder.
6. Recheck federal guidance quarterly during 2026 for renewal updates.

Learn how Paycom automates and simplifies claiming Work Opportunity Tax Credits.

2026 legislative outlook

Because WOTC is a temporary tax provision, Congress must periodically reauthorize it. As of early 2026, industry guidance widely describes the credit as expired for 2026 start dates and awaiting potential reauthorization.

Several proposals discussed in late 2025 and early 2026 would extend WOTC for multiple years and may include enhancements such as higher credit percentages, expanded eligibility to additional worker categories and adjustments that make the incentive more impactful for employers.

Keep in mind: Until legislation is enacted, any proposed enhancements are not yet law. Employers should monitor updates from the IRS, the U.S. Department of Labor and their state workforce agency.

Continue screening during the lapse

If your organization continues hiring in 2026, don’t wait for Congress to act before you act. Build (or keep) screening into your process now.

A practical approach:

• Treat 2026 hires the same as 2025 hires for WOTC paperwork timing.
• Submit forms even if your state is not issuing determinations for 2026 start dates yet.
• Maintain a WOTC hiatus log with start dates, submission dates and confirmation receipts so you can move quickly if retroactive credits become available.

How HR tech supports compliance

When hiring volume is high, manual WOTC workflows can break down — especially under a tight 28‑day filing deadline. HR and payroll technology can reduce risk by embedding Work Opportunity Tax Credit program screening into the application and onboarding experience, prompting the right forms at the right time and alerting teams to state submission requirements.

A tax credits service supported by specialized experts and easy-to-use HR tech can help you:

• screen candidates consistently without adding steps for recruiters
• capture required signatures and data on time
• route Form 8850 and supporting documentation to the right state agency
• track certification status and deadlines
• maintain a defensible audit trail

If you miss the preemployment-stage paperwork, you generally can’t recreate it later, which is why automation and workflow prompts can be the difference between capturing a credit and forfeiting it.

FAQs

Is the Work Opportunity Tax Credit program available in 2026?

As of early 2026, the program’s latest authorization ended Dec. 31, 2025. Unless Congress reauthorizes WOTC, employers generally can’t claim credits for employees who begin work in 2026. However, employers may still want to screen and file on time to preserve eligibility if a retroactive renewal occurs.

Should employers continue WOTC screening during the hiatus?

Yes. Continue screening, completing Form 8850 on or before the offer date and submitting required forms within 28 days of the start date. This helps ensure you’re compliant with filing rules and ready if certifications resume retroactively.

Can an employer make the WOTC form mandatory?

No. Participation is voluntary for applicants. Employers can explain why the information is requested and how it can support hiring incentives, but completion must be optional.

Are WOTC credits refundable?

Generally, no. WOTC is typically a nonrefundable credit. Employers should consult a tax professional about how credits can be applied, carried back or carried forward based on their specific situation.

How do I file a WOTC certification request?

Submit IRS Form 8850 and the appropriate ETA form (9061 or 9062) to your state workforce agency within 28 days of the employee’s start date. Rules can vary by state, so always check your state workforce agency’s submission requirements.