The IRS quietly retired a tax form this year. That form used to unlock up to $9,600 per qualifying hire. Most business owners never saw the announcement. Even fewer understood what it meant for their next round of hiring.
I am talking about the Work Opportunity Tax Credit, or WOTC. It rewards employers for hiring people who face real barriers to finding work. Veterans, people with disabilities, and the long-term unemployed all qualify. As of this year, the credit sits in a legislative hiatus, and I think that deserves your attention for two reasons.
First, history says it is coming back. Second, the businesses that keep preparing now will be the ones who benefit most once it does.
What the Work Opportunity Tax Credit Actually Does
WOTC is a federal tax credit under Section 51 of the Internal Revenue Code. It rewards employers for hiring from ten specific target groups. Those groups include qualified veterans, SNAP recipients, ex-felons, and people referred through vocational rehabilitation programs, among others.
The math works like this. You can generally claim 25 percent of first-year wages if the employee works between 120 and 400 hours. That climbs to 40 percent if the employee works 400 hours or more. Most target groups carry a $6,000 wage cap, which caps the credit at $2,400 per hire.
Certain veteran categories push that cap much higher, up to $24,000 in wages for some disabled veterans. That is where the maximum $9,600 credit comes from. I will walk through those veteran categories in more detail shortly, because they matter more than most owners realize.
Claiming the credit takes two steps once a hire gets certified. Taxable businesses calculate the amount on Form 5884, then carry it onto Form 3800 as part of the general business credit. WOTC is nonrefundable, meaning it offsets tax you actually owe rather than generating a check from the IRS. Even so, dollar-for-dollar tax offsets are hard to beat, and this credit delivers exactly that.
Why Congress Let It Lapse, and Why That Might Not Matter
Here is the part that surprises most business owners. WOTC expired on January 1, 2026. The most recent authorization only covered workers who began employment on or before December 31, 2025. The IRS confirmed this directly, and it formally retired Form 8850, the pre-screening form employers used to start a claim, in March 2026.
However, this is not new territory for WOTC. Congress has reauthorized this credit thirteen separate times since 1996. Nearly every time, the reauthorization applied retroactively, covering the entire gap period. A 2013 lapse, for example, did not get resolved until late 2014, and Congress still made the credit apply to every eligible hire made during that lapse.
Congress is even still funding state agencies to administer the program during the current hiatus. That detail tells you something important. Lawmakers are not treating this as a dead program. They are treating it as a paused one.
A credit in hiatus is not a credit that is gone. It is a credit waiting for its paperwork to catch up.
Hiring Veterans Is Where the Real Money Sits
If you hire veterans, pay close attention here. WOTC treats veteran hires differently than almost every other target group, and the differences add up fast.
A veteran unemployed for at least four weeks qualifies your business for the standard $6,000 wage cap. A veteran unemployed for six months or more raises that cap to $14,000. Disabled veterans carry a $12,000 cap on their own, and disabled veterans unemployed for six months or longer push the cap all the way to $24,000. At the 40 percent rate, that translates into a $9,600 credit for a single hire.
Here is what that looks like in practice. Say you hire a disabled veteran who was out of work for eight months, and you pay him $30,000 in first-year wages while he logs 500 hours on the job. The wage cap for his category sits at $24,000, and the hours clear the 400-hour threshold for the higher 40 percent rate. That single hire produces a $9,600 credit, roughly a third of his first-year pay coming straight off your tax bill.
I have watched contractors and manufacturers build entire hiring pipelines around veteran recruitment for exactly this reason. The credit rewards exactly the kind of hiring that also tends to produce loyal, well-trained employees. Veterans bring discipline and structure that transfers directly into most trades and operations roles.
The Long-Term Unemployed Group Nobody Talks About
Most business owners have never heard of this target group, and that is a shame, because it applies more often than people think. The long-term unemployed category covers individuals who spent at least 27 consecutive weeks without a job and received unemployment compensation during at least part of that stretch.
This group carries the standard $6,000 wage cap, so the maximum credit runs $2,400 per hire. That might sound modest next to the veteran figures. Still, for a business making several hires a year, those credits stack up into real money by tax season.
Picture a retail owner who hires three people this year, each coming off a long stretch of unemployment. That alone represents up to $7,200 in potential credits once the program returns, just from paying attention to one line on an application.
I bring this up because so few employers screen for it. Nobody asks a job applicant how long they spent out of work, mostly because it feels awkward. A simple, properly worded pre-screening process handles that question for you, without making anyone uncomfortable.
Hiring People With Disabilities Isn’t Just Good Policy
This next group deserves more attention than it usually gets. Vocational rehabilitation referrals, meaning individuals with a documented disability referred through a state or federal rehabilitation program, qualify for WOTC under the standard wage cap. Supplemental Security Income recipients qualify under a similar path, and the two groups often overlap.
I have had clients hesitate here, worried that hiring from this group means extra accommodation costs or added complexity. In my experience, that fear rarely matches reality. Most accommodations cost little or nothing, and many amount to a schedule adjustment or a piece of equipment already sitting in a supply closet. People with disabilities often become some of the most loyal, most consistent employees a business ever hires. Turnover tends to run lower. Engagement tends to run higher.
The tax credit is simply a bonus on top of a genuinely good hiring decision. That combination, a strong employee plus a real tax reward, is exactly the kind of alignment I look for when I build hiring strategy into a client’s broader tax plan.
What to Do While the Credit Sits in Limbo
So what should you actually do right now, while WOTC sits in this holding pattern? Keep screening. Keep documenting. Do not wait for Congress before you start the process.
Every time you make a qualifying hire, capture the same information the old Form 8850 required. Track the start date, the target group, and the hours worked. State workforce agencies in many states are still accepting and date-stamping these submissions, even without final certification.
I worked with a landscaping client who kept this discipline going through a prior WOTC lapse a few years back. When Congress finally reauthorized the credit retroactively, her business claimed credits on nearly a dozen hires made during the gap. Employers who stopped screening during that same lapse simply lost that money, permanently. This same logic runs through the proactive planning I described in Why Your CPA Can’t Save You in January: the work that protects your tax position almost always happens before the deadline, not after it.
If your business has not screened a new hire for WOTC eligibility since the start of this year, that gap is worth closing on your very next hire, not your fiftieth.
Why This Is a Credit Worth Fighting For
I will step outside my usual lane for a moment and say plainly what I think. Congress should reauthorize this credit, and soon.
WOTC exists at the intersection of two things I care about deeply: helping small business owners keep more of what they earn, and rewarding the kind of hiring that actually strengthens a community. Veterans deserve employers who actively seek them out. People with disabilities deserve the same. The long-term unemployed deserve a real path back into the workforce, not just sympathy.
Bipartisan legislation, including a bill currently sitting in Congress that would raise the credit percentage and expand eligible wage caps, shows this is not a partisan fight. It has never been one. WOTC has survived thirteen reauthorizations precisely because lawmakers on both sides keep recognizing its value. I expect a fourteenth is coming. I just hope it comes sooner rather than later, because every month of delay is a month of hiring decisions made without the incentive that should be shaping them.
The Bottom Line
WOTC may be quiet right now, but quiet does not mean gone. The businesses that keep screening, documenting, and hiring from these target groups today will be the ones ready to claim real money the moment Congress acts.
That is the same discipline behind every strategy I write about on this blog: build the habit before the law catches up to reward it.
Welcome to the New Age of Accounting. Let’s begin.
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Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
