The Work Opportunity Tax Credit (WOTC) has historically encouraged employers to hire people from groups that face barriers to employment. Current IRS guidance says the credit does not apply to employees who begin work after December 31, 2025, and Form 8850 is no longer in use. Employers may still need to review records and tax-credit matters related to eligible employees who started by the deadline. The practical next step is to confirm each situation with a qualified tax professional and the appropriate state workforce agency before relying on a prior-year credit or process.
Why Tax Credits and Hiring Matters for Employers
For many years, the Work Opportunity Tax Credit gave eligible employers a federal tax incentive for hiring and employing people certified as members of specified targeted groups. Those groups included certain veterans, people receiving public assistance, people referred through vocational rehabilitation, and individuals experiencing long-term unemployment. Eligibility depended on the applicable rules and certification; an applicant’s disclosure alone did not establish that an employer could claim the credit.
The credit’s authorization ended for employees who began work after December 31, 2025. That timing matters to employers reviewing past hiring activity, payroll records, pending certification requests, or tax filings. A clear record of hire dates and the steps taken at the time can help an employer and its tax adviser determine whether any prior-period issue still needs attention.
The IRS explains the program’s historical rules and current end date in its Work Opportunity Tax Credit guidance.
Common Human Resources Gaps to Review
WOTC-related administration often crossed recruiting, onboarding, payroll, HR, and tax preparation. When ownership was unclear, employers could miss a deadline, lose track of an application, or have difficulty matching a certification to the employee and wages in question. Those process gaps are worth reviewing even though the credit is no longer available for post-2025 hires.
- Unclear ownership: No one person or team was responsible for screening, submission follow-up, record retention, and communication with the tax preparer.
- Incomplete records: Hiring dates, application records, certification decisions, or payroll data were stored in different systems without a reliable way to reconcile them.
- Outdated instructions: Recruiting or onboarding materials still describe WOTC as an active incentive for 2026 hires or instruct staff to use Form 8850 for new hires.
- Unresolved older cases: Requests or tax filings for people who began work by the applicable deadline remain unreviewed or lack supporting documentation.
Start with the records already available. Identify the relevant start dates, locate any submitted applications or agency correspondence, and ask the organization’s tax adviser whether further action is appropriate. Avoid collecting sensitive applicant information unless there is a current, approved business and legal basis to do so.
Payroll, Benefits, and Compliance Questions to Ask
A focused review can help employers understand what happened before the program ended and what records may still matter. HR and payroll leaders can use questions like these to organize a conversation with their tax adviser:
- Which employees began work on or before December 31, 2025, and may have been considered under the rules then in effect?
- Was a certification request submitted to the appropriate state workforce agency, and is the agency’s response on file?
- Do the hiring records, certification documents, payroll data, and tax workpapers identify the same employee and period?
- Are any prior-year claims, amended filings, or agency requests still pending?
- Have references to WOTC and Form 8850 been removed or updated in 2026 recruiting and onboarding materials?
- Who will own the review and coordinate questions among HR, payroll, the tax preparer, and the state agency?
The IRS states that Form 8850 is no longer in use and that the credit does not apply to employees who begin work after December 31, 2025. Employers should not use outdated forms or assume an old filing deadline still applies to a new hire. Review the current IRS notice and consult a tax professional for the treatment of any eligible prior-period employee.
See the IRS notice: Form 8850 is no longer in use.
Where PEO Support Can Simplify the Process
For employers reviewing older WOTC activity, an organized HR and payroll process can help gather relevant records for the organization’s tax adviser.
For future hiring, it can also help keep onboarding instructions current and make sure employees are not asked to complete obsolete forms. A PEO does not determine an employer’s tax eligibility or guarantee a credit; tax questions should be confirmed with a qualified tax professional.
Explore ESI’s Human Resources support and payroll services to see how connected support can reduce administrative friction. Employers can also review payroll administration services.
Reviewing Prior-Period WOTC Records
Keep records of relevant hire dates, certification requests and responses, payroll data, and prior filings together where they can be reviewed by the organization’s tax adviser. For older cases, confirm whether any further action is appropriate before relying on a prior process.
FAQs for Growing Businesses
What is the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit was a federal business tax credit for employers that hired and employed individuals certified as members of certain targeted groups. Eligibility and the amount of any credit depended on the law and facts applicable to the employee and employer.
Can an employer claim WOTC for a person who starts work in 2026?
IRS guidance says the credit does not apply to employees who begin work after December 31, 2025. Employers should check current federal guidance for any later legislative change before relying on older WOTC information.
Can employers still review WOTC matters for earlier hires?
Yes. Employers may review records, certification requests, agency responses, payroll data, and tax filings for employees who began work by December 31, 2025. Ask a qualified tax professional whether any prior-period matter needs follow-up.
Should employers keep prior WOTC records?
Employers should follow the record-retention rules that apply to their tax and employment records. Keep relevant hiring dates, agency correspondence, certification documents, payroll data, and prior tax workpapers organized, and protect sensitive applicant information.
How can a PEO help with WOTC-related administration?
A PEO may help employers organize HR and payroll processes, locate relevant records, and keep onboarding instructions current. A PEO does not determine tax eligibility or guarantee a credit; employers should confirm tax questions with a qualified tax professional.
Where can employers get help reviewing HR and payroll processes?
For help reviewing HR and payroll processes, schedule a conversation with ESI.
How ESI Supports HR and Payroll Administration
Learn more about ESI’s Human Resources support, payroll services, and payroll administration services.
