The Work Opportunity Tax Credit: watch this space in 2026

Where things stand (as of Nov 2, 2026)

• The Congressional Research Service reports that WOTC authority lapsed Jan 1, 2026. Congress funded state WOTC offices in the Consolidated Appropriations Act, 2026 (enacted Feb 2026) but didn’t reauthorize the credit.
• Under Department of Labor guidance (TEGL 09-25), state workforce agencies may accept and review requests for people who started on or after Jan 1, 2026, but may not issue certifications unless Congress reauthorizes.¹
• The IRS "About Form 8850" page reads: "Form 8850 is no longer in use – 19-MAR-2026."²
• Hires who started on or before Dec 31, 2025 were covered under the old rules, and unused credit can generally carry back 1 year and forward 20. Your CPA can tell you whether any of your earlier hires fit.

How the credit has worked

• A federal general business credit for hiring people from certain targeted groups.
• Generally 40% of up to $6,000 of first-year wages, so up to $2,400 per hire. Up to $24,000 of wages can count for certain qualified veterans.³
• Hires need at least 120 hours (25% rate) or 400 hours (40% rate).

Who it has covered

Certified members of targeted groups, including qualified veterans, TANF recipients, SNAP recipients ages 18–39, SSI recipients, vocational rehabilitation referrals, qualified ex-felons, designated community residents, summer youth employees, long-term family assistance recipients, and the long-term unemployed.

The playbook, if Congress revives it

1. Pre-screen at the offer. The applicant and employer complete Form 8850 on or before the day of the job offer.
2. Submit within 28 days of the start date to your state workforce agency, plus any DOL forms your state asks for.
3. Get certification from the state.
4. Claim it on Form 5884, which flows to Form 3800 on the business return.⁴
5. Hiring in 2026? Ask your state workforce agency whether it’s logging requests during the lapse. Some state agencies say they’re accepting and holding requests in case a fix is retroactive.

Run it by your CPA

Ask your CPA to give you a heads-up if Congress revives the credit, and whether a fix would reach your 2026 hires.

Every business is a little different, so check with your CPA for your situation. Good CPAs are on your team, and they love an owner who shows up with the homework done.

More from Dad’s tax playbook

• When the S-corp election pays off: Payroll tax saved minus the cost of running an S corp. The two-column math and Form 2553 timing.
• Put your kids on payroll: By business type: when kids’ pay skips FICA, their standard deduction, and the Roth IRA angle.
• Put your spouse on payroll: Social Security credit in their name, their own 401(k) deferrals, and the QJV option.
• S-corp owner health insurance: W-2 Box 1 only, then Form 7206. One payroll setting, one form.
• The accountable plan: Get paid back for miles, phone and home office without it counting as wages.
• The Augusta rule: Rent your home to your company for real meetings, fewer than 15 days a year.
• The Solo 401(k): Two hats, two contributions: 2026 limits, deadlines and the S-corp angle.
• PTET: let your business pay the state tax: How pass-through entity tax elections work around the personal SALT cap.
• Dial in your W-4: Step 2(c), Step 3 and Step 4(c) for owners, spouses and kids on payroll.
• S-corp reasonable salary by profession: pay ranges for 15 professions, the IRS factors and a one-page salary memo.

Payroll Dad is a cartoon run by a real small family business. This is general education, not tax advice for your situation.