WOTC: Covered Hires, Certification, and the 2026 Lapse

WOTC's current authorization covers eligible workers who began work on or before December 31, 2025. For new hires starting in 2026, the program is in an authorization lapse. State agencies may accept and retain timely certification requests, but cannot issue certifications for those later hires unless the credit is reauthorized.

Do not treat a submitted 2026 request as an approved tax credit. Employers should continue following their state's filing deadlines to preserve a possible claim if federal law changes. A future extension or special deadline relief is not guaranteed.

Who can qualify for a covered hire?

The employee must be certified by the State Workforce Agency as a member of a WOTC targeted group. Categories include qualifying veterans, certain TANF or SNAP recipients, vocational rehabilitation referrals, qualifying formerly incarcerated workers, and long-term unemployment recipients. Each category has specific age, benefit, unemployment, or timing requirements; membership cannot be assumed from a broad description.

Taxable employers may claim an income-tax credit for qualifying covered hires. Eligible tax-exempt organizations have a separate payroll-tax credit limited to qualifying veterans. Rehiring someone who previously worked for the employer generally does not qualify.

How much can the credit be?

For many targeted groups, a taxable employer's credit is 40% of up to $6,000 of qualified first-year wages when the worker performs at least 400 hours of service, giving a maximum of $2,400. A 25% rate applies when the employee works at least 120 but fewer than 400 hours. Fewer than 120 hours does not qualify.

Some veteran categories allow a higher wage limit and a taxable-employer credit of up to $9,600. Other groups have different calculations, including special rules for long-term family assistance recipients. The advertised maximum is not the amount for every employee. Qualified tax-exempt employers must use their separate calculation.

Submit certification to the state agency

1. Pre-screen on time. The employer and applicant complete Form 8850 on or before the day the job offer is made.
2. Use the worker's state. Find the State Workforce Agency's WOTC contact for the state where the employee works. Use its portal or submission instructions.
3. Meet the 28-day deadline. Submit Form 8850 within 28 calendar days after the worker starts. Include ETA Form 9061, or ETA Form 9062 for a qualifying conditional certification, and the supporting documents requested by the agency. Retain the receipt and application number.
4. Distinguish the hire dates. For a covered pre-2026 hire, follow up on the certification decision. For a 2026 hire, ask about the state's authorization-lapse intake process and pending status; do not expect a current certification.
5. Keep payroll records. Track eligible wages, hours of service, and amounts used for other wage-based tax credits. The same wages generally cannot be counted for two credits.

California employers can use EDD's WOTC application and status route. Its current process accepts and retains requests for workers starting January 1, 2026 or later pending federal reauthorization.

Claiming a certified, covered hire

After receiving the required certification, taxable employers calculate the credit on Form 5884 and report the general business credit as required on Form 3800. Qualified tax-exempt employers claiming for eligible veterans use Form 5884-C against the applicable payroll tax.

The credit is subject to tax limits. Taxable employers generally may carry an unused general business credit back one year and forward 20 years under the applicable rules. If a state certification arrives after you filed the relevant return, ask your tax preparer about the appropriate amended-return or other permitted claiming procedure.

If certification is denied or records are missing

Request the state agency’s reason and follow its correction or review instructions by the stated deadline. Keep your timely filing receipt, pre-screening record, and targeted-group documentation. A pending 2026 authorization-lapse request is different from a finding that the worker failed an eligibility test; ask which status applies before claiming anything on a tax return.

Who handles an application or tax question?

The state WOTC office handles certification requests, missing documents, and application status. Your tax preparer handles wage calculations and the federal return. SBA.gov is not the application or approval system for this tax credit.

For another business tax provision with a different filing process, see the Section 179 equipment deduction guide. Neither provision is a business loan or an automatic grant.