Form 8861

The Welfare-to-Work credit is a tax credit that incentivizes employers to hire individuals from certain targeted groups who face significant barriers to employment. The credit is provided to employers who hire individuals from targeted groups such as:

• Long-term family assistance recipients
• Qualified veterans
• Designated community residents
• Ex-felons
• Vocational rehabilitation referrals
• Supplemental Nutrition Assistance Program (SNAP) recipients
• Supplemental Security Income (SSI) recipients

To claim the Welfare-to-Work credit, employers must file Form 8861 with their tax return for the applicable tax year.

Who is Eligible for Welfare-to-Work credit?

To be eligible for the Welfare-to-Work credit, the employer must have hired the targeted employee from one of the above-mentioned groups, and they must have worked for the employer for at least 180 days during the first year of employment. Additionally, the employee must not have been employed by the employer during the previous 60 days and must not have been hired to replace another employee.

The amount of the Welfare-to-Work credit is based on a percentage of the first-year wages paid to each qualifying employee and can vary depending on the specific targeted group. The credit can range from $1,200 to $9,600 per employee, depending on the employee’s targeted group status.

How to fill out form 8861?

1. Identify the targeted employees you hired during the tax year and determine their targeted group status.
2. Calculate the total wages paid to each targeted employee during the first year of their employment.
3. Determine the amount of the credit for each targeted employee based on their targeted group status and the amount of their wages paid.
4. Add up the total amount of credits for all targeted employees.
5. Fill out Form 8861 with the following information:

• The employer’s name, address, and employer identification number (EIN)
• The tax year for which the credit is being claimed
• The targeted group status and first-year wages for each qualifying employee
• The total credit amount for all qualifying employees
• Any other required information, such as the name of the person who completed the form and their contact information

Attach Form 8861 to the employer’s tax return for the applicable tax year.

It is important to note that there may be additional requirements or instructions for filling out Form 8861, depending on the specific situation. It may be helpful to consult with a tax professional or refer to the instructions provided by the IRS.