The Answer

Yes, Jason, the regulations for WHEN employment credits can be obtained is confusing and often convoluted! 

Generally, the Work Opportunity Tax Credit cannot be taken retroactively, since it is a statutory requirement that the information on the IRS 8850 must be provided by a job applicant to the employer no later than the date of a job offer AND the 8850 with original signature must be received/postmarked by the certifying agency no later than new hire’s 28th day of employment.

The only exception to this rule in the past was the Katrina WOTC category, which only required employers to obtain “reasonable documentation” of eligibility and did not require submission of an 8850 to a certifying agency.  Should this category be renewed, the current language in the pending legislation also allows for retroactive claiming of the incentive.

In addition to WOTC, there are several expired federal credits with jobs components that, while currently unavailable for FY 2010, can be claimed for up to 3 prior fiscal years retroactively.  These credits include the Empowerment Zones, Renewal Communities, Indian Employment Credit and a credit for hiring in the District of Columbia.  In addition to the retroactive provisions, there is legislation pending to renew all of these incentives retroactively to January 1, 2010.

Numerous states have current, proposed or expired employment tax credits and incentives, and the timing required to claim the benefit will vary from state to state.  The most lucrative of the state incentives is the California Enterprise Zone program (CAEZ) which can currently be taken retroactively, although there is legislation pending to limit the retroactive provisions. The Maryland and New York credits require paperwork and timing similar to WOTC and are not retroactive, as was the Pennsylvania credit (EIP) before it expired.  Other states, like Arizona, Illinois, Kentucky and North Carolina, can be taken retroactively.

Needless to say, the hodge-podge of requirements and timeliness rules are good reasons to have NTCI administer your employment credits programs.