All posts by Max Shenker

Representatives Lloyd Smucker (R-PA) and Terri Sewell (D-AL), together with several other lawmakers, have introduced the “Improve and Enhance the Work Opportunity Tax Credit Act.” According to Congressman Smucker’s press release, “The Improve and Enhance the Work Opportunity Tax Credit Act of 2023 would update the WOTC, which has not been changed since its enactment twenty-seven years ago, and encourage longer-service employment. The bill would (1) increase the current credit percentage from 40% to 50% of qualified wages and (2) add a second level of credit for employees who work 400 or more hours. In addition, the bill eliminates the arbitrary age cap at which SNAP recipients are eligible for WOTC. This change will provide an incentive to hire older workers and better align the credit with the work reforms adopted in the debt ceiling negotiations in 2023.” The text of the bill can be found here. The following are the specific changes the bill proposes: For certified employees who work at least 400 hours in their first year, increase the credit percentage from 40% to 50%. For certified employees who work more than 400 hours in their first year, increase the qualified wage caps as follows: For target groups with a cap of $6,000 in qualified wages, double the qualified wages to $12,000 for a total possible credit of $6,000 (compared to the current $2,400). Disabled veteran: The current credit is 40% of the first $12,000 (up to $4,800); the bill would increase that to 50% of the first $24,000 (up to $12,000). Long-term unemployed veteran: The current credit is 40% of the first $14,000 (up to $5,600); the bill would increase that to 50% of the first $28,000 (up to $14,000). Long-term unemployed disabled veteran: The current credit is 40% of the first $24,000 (up to $9,600); the bill would increase that to 50% of the first $48,000 (up to $24,000). The Summer Youth target group would remain at 40% and not go up to 50%. The age ceiling for the SNAP target group, currently at age 39, would be eliminated, allowing any new hire that otherwise meets the SNAP requirements to be certified. How and When Could This Happen? This bill represents the most significant proposal to enhance the value of WOTC in many years. However, to be considered, Congress needs to negotiate a tax bill. Tax bills are typically included with large legislative packages such as annual appropriation bills. Congress passed a continuing resolution in November to avoid a government shutdown and delay annual appropriations legislation until 2024. In this instance, Congress created two deadlines at which different parts of the government could shut down without new legislation: January 19 and February 2. According to the Washington Post, House Speaker Mike Johnson “pushed through the laddered approach — leaning on support from Democrats to pass the GOP-controlled chamber — while vowing not to take up another CR in January or February. He reiterated that pledge to House members in a letter last week. ‘It continues to be my intention that the House and Senate complete action on full-year bills ahead of the January 19 and February 2 deadlines provided for in the last continuing resolution,’ Johnson wrote. ‘I do not intend to have the House consider any further short-term extensions.’” Therefore, one opportunity for tax legislation will be in January in the context of government funding. Despite Speaker Johnson’s statements, that process could certainly be delayed further into 2024. Former House Ways and Means Chairman Dave Camp recently interviewed the current Ways and Means Chairman, Jason Smith, at a PwC event. According to Politico’s Weekly Tax newsletter, “[Chairman] Smith believes that a variety of potential vehicles could exist next year, according to Camp — which would mean avenues beyond government funding measures needed early in 2024.” However, even if Congress does take up tax legislation, it is unlikely that this WOTC bill will rise to the top of priority issues. Nevertheless, it introduces important policy considerations for the future of the program, which comes up for renewal at the end of 2025. Department of Labor to Study WOTC DOL has funded an independent contractor, Economic Systems, Inc., to perform an evaluation of the WOTC program. Among the questions the evaluation seeks to research are: What are the characteristics of jobs of WOTC-hires? What types of employers apply for WOTC? How is WOTC reflected in employer hiring and retention practices/policies? To what extent does pre-screening for WOTC eligibility affect employment outcomes? According to a public notice, surveys of various interest parties will be issued in the winter of 2024-2025. State WOTC Programs Several state legislatures have proposals to institute some kind of state WOTC program. Maryland successfully passed a state income tax credit match to WOTC effective in 2022. Here are some of the others we are watching: Georgia House Bill 372 Missouri Senate Bill 1207 New York Senate Bill S4833A & Assembly Bill A1991A North Carolina House Bill 853 Pennsylvania HM 41747 Pennsylvania HM 40254 On December 19, 2023, the city of Tacoma, Washington passed an ordinance creating a $1,000 local WOTC for employers that add a new position for an individual certified by the State Workforce Agency as a member of the vocational rehabilitation WOTC target group.

The IRS has announced preemptive denial of ERC claims for 20,000 taxpayers based on entities that did not exist prior to 2022 or pay wages.

A taxpayer whose ERC claim was denied by an IRS auditor has filed suit against the IRS and Treasury Department.

Unprocessed ERC claims at the end of November reached the highest number since the IRS began reporting the volume in 2021.

A new Financial Crimes Enforcement Network alert to financial institutions highlights fraud schemes related to the ERC.

ERC warnings from the IRS have caused employers to be skeptical of the credit. This review explores recent IRS statements on eligibility.

Learn more about the employee retention credit (ERC) withdrawal program from new guidance provided by the IRS during a recent webinar.

The IRS has published instructions for businesses to withdraw their ERC claims. Learn when ERC withdrawal may be the right course of action.

A late September report shows the number of unprocessed Forms 941-X is up from the beginning of the month, a good indicator of the current ERC backlog.

Explore the IRS's latest announcement regarding the ERC moratorium and changes to pandemic tax credits affecting taxpayers.

The IRS released two new guidance memos regarding the Employee Retention Credit. Employers wondering about their eligibility should review what they say.

There's a new set of FAQs from the IRS about the ERC, covering things such as eligibility, qualifications, ERC scams, timing and more.

The backlog of ERC claims at the IRS is still above 400,000. Recent legislation includes report language directing the IRS to address the backlog.

The IRS Office of Chief Counsel released a memo discussing the limitations of ERC eligibility related to a supply chain disruption.

The next installment of our ERC Fraud Watch includes details from IRS criminal investigations involving fake businesses and employees.

The IRS has increasingly labeled some ERC claims as fraud. It's important to recognize the signs of fraud to ensure your claim meets the right standards.

Max Shenker provides another update on the backlog of unprocessed ERC claims at the IRS, which has more than doubled since the beginning of 2023.

The IRS has reiterated warnings against improperly claiming the ERC, while the bureau also investigates fraud schemes including stolen ERC checks.