Certification deadline extended for work opportunity tax credit

By Paul Bonner

The IRS issued Notice 2021-43 providing transition relief for the deadline by which employers must request certification of employees as members of the designated community resident or qualified summer youth employee targeted groups for purposes of the work opportunity tax credit (WOTC). Under the transition relief, certain employers have until Nov. 8, 2021, to submit required certification requests.

To be certified as a designated community resident or a qualified summer youth employee under the WOTC, an employee must have a principal place of residence within an empowerment zone where the employee continuously resides.

An individual will not be treated as a member of a targeted group unless the employer (1) obtains certification from the designated local agency (DLA) that the individual is a member of a targeted group, on or before the day the individual begins work, or (2) completes a prescreening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) on or before the day the individual is offered employment and submits the notice to the DLA to request certification that the individual is a member of a targeted group not later than 28 days after the individual begins work.

The work opportunity credit is temporary, most recently extended for employees beginning work after Dec. 31, 2020, and before Jan. 1, 2026, by the Consolidated Appropriations Act, 2021, P.L. 116-260, on Dec. 27, 2020. The act also generally extended until Dec. 31, 2025, any designation by an appropriate secretary of an empowerment zone.

Under Rev. Proc. 2021-18, a state or local government is generally deemed to have extended an empowerment zone nomination's expiration until Dec. 31, 2025, unless it declined to do so in writing by May 25, 2021. But, because that automatic extension did not occur until after the opt-out deadline (May 25), employers that hired an individual who is a designated community resident or a qualified summer youth employee who began work for that employer on or after Jan. 1, 2021, might not have submitted Form 8850 to the designated local agency within 28 days after an individual began work, the notice states.

Therefore, the notice allows an employer that did not submit Form 8850 to the designated local agency within 28 days after hiring an individual as a designated community resident or qualified summer youth employee who began work on or after Jan. 1, 2021, and before Oct. 9, 2021, to do so by Nov. 8, 2021.

The notice also acknowledges that some employers may have submitted Form 8850 within 28 days regardless of an empowerment zone nomination's expiration. Those employers that received a certification denial due to the expiration may also receive relief if they resubmit Form 8850 by Nov. 8. Employers whose Form 8850 was not denied or that were issued a certification despite the expiration do not need to resubmit the form.

An employer that hires an individual who is a designated community resident or a qualified summer youth employee and who began work for the employer on or after Oct. 9, 2021, is not eligible for the transition relief described in this notice with respect to that new employee.

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