Procedures for Obtaining Work Opportunity Credit Certifications for 2014 Hires Outlined by IRS

The IRS has issued another notice to “clean up” problems created by Congress’s delay in extending expired code provisions, waiting until late December to pass the Tax Increase Prevention Act of 2014 (TIPA 2014).  In Notice 2015-13 the IRS provided procedures to be used for employers that hired individuals that retroactively qualify as “targeted” individuals during the period where the work opportunity credit under IRC §51 had expired. 

TIPA 2014 retroactively extended that credit through the end of 2014 on December 19, 2014.  Thus, targeted individuals hired at any time during 2014 could have qualified an employer for the credit.

However, under §51(d)(13)(A) (also retroactively extended) an individual will not be treated as a member of such a group for the credit unless:

  • On or before the day the individual begins work, the employer obtains certification from the “designated local agency” (DLA) that the individual is a member of a targeted group; or
  • The employer completes a pre-screening notice (Form 8850) on or before the day the individual is offered employment and submits such notice to the DLA to request certification not later than 28 days after the individual begins work.

DLAs are generally state employment security agency.  Such agencies, following the expiration of the statute, were not issuing such certifications, nor were they accepting Forms 8850 for what was a no longer in existence credit.

Since Congress does not have the power to order time to move backwards and did not issue a fix on its own, the IRS has issued a fix that is similar to the one the agency issued the last time Congress extended the provision long after it had left the law.

The notice provides that an employer will be deemed to have satisfied the certification requirements of IRC §51(d)(13)(A)(ii) if

  • The employer hired a member of a targeted group on or after January 1, 2014 and before January 1, 2015 and
  • The employer submits the completed Form 8850 to the appropriate DLA to request certification no later than April 30, 2015.

The notice cautions that an employer still may not claim the credit until the employer actually receives the certification from the DLA.  Employers that have not yet filed their returns would, therefore, generally file for an extension of time to file the return to await the certification.  Those who have already filed, or whose extension time period comes to an end, will need to file amended returns to claim the credit once certification is received.