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Instructions for Form 8850 2006 Tax Year

General Instructions

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Section references are to the Internal Revenue Code unless otherwise noted.

What's New

The Tax Relief and Health Care Act of 2006 extended the work opportunity and welfare-to-work credits to cover individuals who begin work for the employer before January 1, 2008. In addition, for individuals who begin work for the employer after December 31, 2006, the Act provides that the welfare-to-work credit will be combined with the work opportunity credit. To carry out these changes, section 51 was amended, and section 51A was repealed.

The Form 8850 that you are required to file with the work opportunity tax credit (WOTC) coordinator for your state workforce agency (SWA) is now due no later than the 28th day after the job applicant begins work for you.

For employees who begin work after December 31, 2006, the following changes pertaining to targeted group members apply.

  • Ex-felons are no longer required to be a member of a low-income family.

  • Food stamp recipients must be at least age 18 when hired, but not age 40 or older.

The February 2007 revision of Form 8850 and its instructions makes minor updates to the January 2007 revisions. Employers may continue to use the January 2007 revision of Form 8850.

Purpose of Form

Employers use Form 8850 to pre-screen and to make a written request to a SWA (unless the employee checks only the Hurricane Katrina employee box) to certify an individual as a member of a targeted group for purposes of qualifying for the work opportunity credit.

Submitting Form 8850 to the SWA (unless the employee checks only the Hurricane Katrina employee box) is but one step in the process of qualifying for the work opportunity credit. The state WOTC coordinator for the SWA must certify the job applicant is a member of a targeted group. After starting work, the employee must meet the minimum number-of-hours-worked requirement for the work opportunity credit. The employer elects to take the credit by filing Form 5884, Work Opportunity Credit.

Caution
The certification requirements described above do not apply to Hurricane Katrina employees. For an employer of a Hurricane Katrina employee, this form is used to accept reasonable evidence that the worker is a Hurricane Katrina employee. It is the employer's responsibility to ascertain that the place where the employee lived on August 28, 2005, (the address on line 1 of the form) is in fact in the core disaster area (see pages 2 and 3 for a list of these areas). The employer is not required to ask employees to furnish any documentary evidence.

Who Should Complete and Sign the Form

The job applicant gives information to the employer on or before the day a job offer is made. This information is entered on Form 8850. Based on the applicant's information, the employer determines whether or not he or she believes the applicant is a member of a targeted group (as defined under Members of Targeted Groups). If the employer believes the applicant is a member of a targeted group, the employer completes the rest of the form no later than the day the job offer is made. Both the job applicant and the employer must sign Form 8850 no later than the date for submitting the form to the SWA.

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