Work Opportunity Credit The work opportunity credit provides businesses with an incentiveto hire individuals from groups that have a particularly highunemployment rate or other special employment needs. Your businessdoes not have to be in an empowerment zone or enterprise community toqualify for this credit. You can claim the credit if you pay or incur"qualified first-year wages" to a "targeted group employee"who begins work for you after September 1996. Caution: At the time this publication was printed, this credit was set toexpire for individuals who begin work for you after June 1999. hotel a PortoTargeted group employee.A targeted group employee is any employee who has been certified byyour state employment security agency (SESA) as a: Recipient of assistance under Aid to Families with DependentChildren (AFDC) or its successor program, Temporary Assistance forNeedy Families (TANF), Veteran, Ex-felon, High-risk youth, Benidorm alloggio in albergo economicoVocational rehabilitation referral, Summer youth employee, Food stamp recipient, or Supplemental security income (SSI) recipient. The employee must meet the requirements explained in theinstructions to Form 8850. State certification required.An employee is not considered a targeted group employee withoutSESA certification. To receive certification, submit Form 8850,Pre-Screening Notice and Certification Request for the WorkOpportunity and Welfare-to-Work Credits, to your SESA. You must either: Receive the certification by the day the individual beginswork, or Do both of the following: Complete Form 8850 by the day you offer the individual ajob, and Submit the form to your SESA by the 21st day after theindividual begins work. Qualified first-year wages.Qualified first-year wages are qualified wages you pay or incur forwork performed by a targeted group employee during the 1-year periodbeginning on the date the individual begins work for you. Qualifiedwages are generally wages subject to the Federal Unemployment Tax Act(FUTA) without regard to the FUTA dollar limit, but not more than$6,000 each tax year for each employee ($3,000 each tax year for asummer youth employee). If the work performed by the employee during more than half of anypay period qualifies under FUTA as agricultural labor, the first$6,000 of that employee's wages subject to social security andMedicare taxes are qualified wages. For a special rule that applies torailroad employees, see Internal Revenue Code section 51(h)(1)(B). Nonqualified wages.See Form 5884 for a complete list of wages that do not qualify forthe credit. Some of the most common wages that do not qualify includewages you pay or incur to an employee who: Has worked for you for more than 1 year, Is your relative or dependent, You rehired, if he or she was not a targeted group employeewhen employed earlier, or Does not work for you for at least 120 hours. Amount of credit.The following table shows the rate you apply to qualifiedfirst-year wages you pay or incur each tax year to a targeted groupemployee who works the number of hours shown. The table also shows themaximum credit you can claim each tax year for each targeted groupemployee. Table 4. Rate and Maximum Credit Each Tax Year for Each Targeted Group Employee accommodation in BirminghamWho Begins Work After September 1997 Maximum Qualified First-Year Maximum Hours Worked Rate Wages Credit At least 400 40% $6,000* $2,400 Fewer than 400 but at least 120 25% 6,000* 1,500            *$3,000 for a summer youthemployee Claiming the credit.Use Form 5884, Work Opportunity Credit, toclaim this credit. Effect on salary and wage deduction.In general, you must reduce the deduction on your income tax returnfor salaries and wages by the amount of your work opportunity credit. Effect on empowerment zone employment credit.Wages you use to claim the work opportunity credit cannot be usedto figure the empowerment zone employment credit. In addition, theyreduce the maximum qualified zone wages you can use to claim theempowerment zone employment credit for an employee who qualifies youfor both credits. Effect of welfare-to-work credit.You cannot claim both the work opportunity credit and thewelfare-to-work credit for the same employee during the same tax year. More information.For more information about the work opportunity credit, see Form5884.