5884 Work Opportunity Credit

2007 Form 5884, Work Opportunity Credit
Purpose: This is the first circulated draft of the 2007 Form 5884, Work
Opportunity Credit, for your review and comments. The major changes are listed
below.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The prior version of Form 5884 is available at:
http://www.irs.gov/pub/irs-pdf/f5884.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and
publications are posted at:
http://taxforms.web.irs.gov/draft_products.html
Comments: Please email, fax, call, or mail any comments to me and email the
reviewer, William Woolf, Jr. @ [email protected] by August 28, 2007.

Mike Cyrus
Tax Forms and Publications
SE:W:CAR:MP:T:B:C
Email: [email protected]
Ph: 202.927.9545
Fax: 202.622.3262

2007 Form 5884 Major Changes
On the Form1] The form is no longer continuous-use because various law changes mean that
it is better served by the annual format, especially with regard to the instructions
(e.g., the line 22 carryback instructions).
2] A Part I heading is added because a Part II has been added to the form. The
Part II is added because the credit is no longer subject to the alternative
minimum tax, necessitating its removal from Form 3800. PL 110-28 sec. 8214;
IRC 38(c)(4)(iv)
3] Line 1 is rewritten to remove the text “began work for you before the applicable
date in the instructions and” because the credit is extended into 2011, a date not
indicated in the instructions. PL 110-28 sec. 8211; IRC 51(c)(4)(B)
It is also rewritten to make the form functional for an employer with a fiscal year
ending in 2008 that would have paid qualified 2nd year wages in the part of such
year which fell in 2008. PL 109-432 sec. 105(e)(2); IRC 51(e)(2)
Therefore:
•

Lines 1a and b are rewritten to add the text "Qualified first-year wages of"
to conform to the language of Form 8861.

•

Line 1c is added to account for the second-year wages and the 50%
reduction.
PL 109-432 sec. 105(e)(2); IRC 51(e)(2)

4] Line 4 is rewritten to remove cooperatives, estates, and trusts because of the
addition of Lines 5-9.
5] Lines 5-9 are necessary because of the addition of Part II. These lines are to
account for passive activities, carryforwards, and carrybacks applicable to
cooperatives, estates, trusts, and other entities. This is because with this credit,
cooperatives, estates, and trusts can elect to allocate a portion to patrons or
beneficiaries.
PL 110-28 sec. 8214; IRC 38(c)(4)(iv)
Adding these new lines means old lines 5 and 6 are now new Lines 10 and 11.
6] The year is updated in the usual places.

In the Instructions1] The What’s New area is rewritten to indicate:
• sec. 8211 of PL 110-28 (first 3 bullets: credit extended, vet group
expanded, designated community residents) and

•

sec. 105(e)(2) of PL 109-432; IRC 51(d)(10) (last bullet: long-term family
assistance recipients).

2] Under Targeted group employee:
• A bullet is added for long-term family assistance recipients. PL 109-432
sec. 105(e)(2; IRC 51(d)(10))
• The high-risk youth targeted group is renamed “Designated community
resident.”
PL 110-28 sec.8211(b); IRC 51(d)(5)
• Conforming with the Form 8850, the text “qualified” is removed from the
last 3 targeted group bullets - summer youth employee, food stamp
recipient, and SSI recipient.
3] The Qualified Wages area is rewritten as follows:
• The text “first-year” is replaced by “first- or second-year”, to include
possible 2nd year wages paid to long-term family assistance recipients.
• The text “the first $6,000 of” is removed from the agricultural labor
discussion to conform to the language in the Form 8861 instructions.
4] The heading Members of a controlled group or businesses under
common control is made a head 2.
5] Part I and Part II headings and instructions are added because a Part II has
been added to the form.
6] Instructions for Lines 1a and b are expanded and combined with new Line 1c
instructions to indicate the following:
• 1st or 2nd year wages and the new long-term family assistance recipients
group.
PL 109-432 sec. 105(e)(2); IRC sec. 51(e)(2))
• The new disabled veterans group, including the greater maximum wages
for such vets, $12,000.
IRC 51(b)(3)(A)
• The new summer youth group.
PL 110-28 sec. 8211; IRC 51(d)(5);
7] New Lines 5, 7, and 8 instructions are added.
8] Old line 5 instructions are renumbered as Line 10 instructions.
9] The year is updated in the usual places.

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Form

I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 5884, PAGE 1 of 4
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432 mm (17") 3 279 mm (11") VERTICAL FOLD IN MIDDLE
PERFORATE: ON FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

5884

Department of the Treasury
Internal Revenue Service

Name(s) shown on return

Part I
1

Current Year Credit

Action

Date

Signature

O.K. to print
Revised proofs
requested

Work Opportunity Credit

OMB No. 1545-0219

2007

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©

Attachment
Sequence No.

Attach to your tax return.

77

Identifying number

Enter on the applicable line below the total qualified first- or second-year wages paid or incurred
during the tax year, and multiply by the percentage shown, for services of employees who are
certified (if required) as members of a targeted group.
a Qualified first-year wages of employees who worked for you at least
3 25% (.25)
120 hours but fewer than 400 hours
$

1a

b Qualified first-year wages of employees who worked for you at
$
least 400 hours

1b

3 40% (.40)

c Qualified second-year wages of employees certified as long-term
3 50% (.50)
family assistance recipients
$
2 Add lines 1a, 1b, and 1c. See instructions for the adjustment you must make for salaries and
wages
3 Work opportunity credit from partnerships, S corporations, cooperatives, estates, and trusts
4 Add lines 2 and 3. Partnerships and S corporations, report this amount on Schedule K; all others,
go to line 5
5 Work opportunity credit included on line 4 from passive activities (see instructions)
6 Subtract line 5 from line 4
7 Work opportunity credit allowed for 2007 from a passive activity (see instructions)
8 Carryforward from 2006 of the New York Liberty Zone business employee credit and carryback
from 2008 of the work opportunity credit (see instructions)
9 Add lines 6 through 8. Cooperatives, estates, and trusts, continue on to line 10. All others, use
this amount to complete Part II
Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see
instructions)
11 Cooperatives, estates, and trusts, subtract line 10 from line 9. Use this amount to complete
Part II
Part II Allowable Credit

1c
2
3

4
5
6
7
8

9

10

12
13
14
15a
b
c
d
e

Regular tax before credits (see instructions)
Alternative minimum tax (see instructions)
Add lines 12 and 13
Credits from Form 1040, lines 47 through 50 and 52 through 54 (or
15a
Form 1040NR, lines 44, 45, and 47 through 49)
15b
Foreign tax credit
15c
Credits from Forms 5735 and 8834
15d
Non-business alternative motor vehicle credit (Form 8910, line 18)
Non-business alternative fuel vehicle refueling property credit (Form
15e
8911, line 19)
Add lines 15a through 15e
Net income tax. Subtract line 15f from line 14. If zero, skip lines 17 through 20 and enter -0- on line 21
Net regular tax. Subtract line 15f from line 12. If zero or less, enter -0Enter 25% (.25) of the excess, if any, of line 17 over $25,000 (see instructions)
Subtract line 18 from line 16. If zero or less, enter -020a
General business credit (Form 3800, line 19)

f
16
17
18
19
20a
b Empowerment zone and renewal community employment credit
20b
(Form 8844, line 26)
c Add lines 20a and 20b
21 Subtract line 20c from line 19. If zero or less, enter -022 Credit allowed for the current year. Cooperatives, estates, and trusts. Enter the smaller of line
11 or 21. Report this amount on Form 1120-C, Schedule J, line 5c; or Form 1041, Schedule G,
line 2c. If line 21 is smaller than line 11, see instructions. All others. Enter the smaller of line 9 or
21. Report this amount on Form 1040, line 55; Form 1040NR, line 50; Form 1120, Schedule J, line
5c; or the applicable line of your return. If line 21 is smaller than line 9, see instructions
For Paperwork Reduction Act Notice, see instructions.

Cat. No. 13570D

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15f
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20c
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Form

5884

(2007)

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 5884, PAGE 2 of 4
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432 mm (17") 3 279 mm (11") VERTICAL FOLD IN MIDDLE
PERFORATE: ON FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 5884 (2007)

General Instructions

Page

Targeted group employee. An employee is a member of a
targeted group if he or she is a:
● Hurricane Katrina employee,
● Long-term family assistance recipient hired after December
31, 2006 (if hired before January 1, 2007, see Form 8861,
Welfare-to-Work Credit).
● Qualified recipient of Temporary Assistance for Needy
Families (TANF),
● Qualified veteran,
● Qualified ex-felon,
● Designated community resident,
● Vocational rehabilitation referral,
● Summer youth employee,
● Food stamp recipient, or
● SSI recipient.
See the Instructions for Form 8850 and section 51(d) for
details and restrictions.

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Section references are to the Internal Revenue Code unless
otherwise noted.

What’s New

2

The Small Business and Work Opportunity Tax Act of 2007
made the following changes.
● The work opportunity credit is extended to cover individuals
who begin work for you before September 1, 2011.

● For individuals who begin work for you after May 25, 2007,
the qualified veterans group is expanded to include veterans
entitled to compensation for a service-connected disability
and who, during the one-year period ending on the hiring
date, were (a) discharged or released from active duty in the
U.S. Armed Forces or (b) unemployed for a period or periods
totaling at least 6 months. The first-year wages taken into
account for these disabled veterans is $12,000.
● For individuals who began work for you after May 25,
2007, the high-risk youth group is renamed “designated
community residents” and expanded to include individuals
who are at least age 18 but not yet age 40. In addition,
residents of rural renewal counties are added to this group.
● Line 1c is added to the form for qualified second-year
wages of employees certified as long-term family assistance
recipients hired after December 31, 2006.

Purpose of Form
Use Form 5884 to claim the work opportunity credit for
qualified first- or second-year wages you paid to or incurred
for targeted group employees during the tax year. Your
business does not have to be located in an empowerment
zone, renewal community, or rural renewal county to qualify
for this credit.
You can claim or elect not to claim the work opportunity
credit any time within 3 years from the due date of your
return on either your original return or an amended return.

How To Claim the Credit
Generally, you must request and be issued a certification for
each employee from the state employment security agency
(SESA). The certification proves that the employee is a
member of a targeted group. You must receive the
certification by the day the individual begins work or
complete Form 8850, Pre-Screening Notice and Certification
Request for the Work Opportunity Credit, on or before the
day you offer the individual a job.
If you complete Form 8850, it must be signed by you and
the individual and submitted to the SESA by the 28th
calendar day after the individual begins work. If the SESA
denies the request, it will provide a written explanation of the
reason for denial. If a certification is revoked because it was
based on false information provided by the worker, wages
paid or incurred after the date you receive the notice of
revocation do not qualify for the credit.
Hurricane Katrina employee. A Hurricane Katrina
employee is an employee who had a main home in the core
disaster area on August 28, 2005, and, within a two-year
period beginning on that date, was hired for a job whose
principal place of employment is in the core disaster area. The
certification requirements described above do not apply to
Hurricane Katrina employees. Instead, the worker must show
the employer reasonable evidence that the worker is a
Hurricane Katrina employee. An employer may use Form 8850
to accept reasonable evidence that the worker is a Hurricane
Katrina employee. If the employer discovers that the worker is
not a Hurricane Katrina employee, wages paid or incurred
after the date of discovery will not qualify for the credit.

Qualified Wages

Wages qualifying for the credit generally have the same
meaning as wages subject to the Federal Unemployment Tax
Act (FUTA). If the work performed by any employee during
more than half of any pay period qualifies under FUTA as
agricultural labor, that employee’s wages subject to social
security and Medicare taxes are qualified wages. For a special
rule that applies to railroad employees, see section 51(h)(1)(B).
Qualified wages for any employee must be reduced by the
amount of any work supplementation payments you received
under the Social Security Act for the employee.
The amount of qualified wages for any employee is zero if:
● The employee did not work for you for at least 120 hours,
● The employee worked for you previously, unless the
employee is a Hurricane Katrina employee who was not in
your employment on August 28, 2005, and this is your first
hire of the employee after that date,
● The employee is your dependent,
● The employee is related to you (see section 51(i)(1)), or
● 50% or less of the wages the employee received from you
were for working in your trade or business.
Qualified wages do not include:
● Wages paid to or incurred for any employee during any
period for which you received payment for the employee from
a federally funded on-the-job training program;
● Wages paid to or incurred for a summer youth employee for
services performed while the employee lived outside an
empowerment zone or renewal community;
● Wages paid to or incurred for a designated community
resident for services performed while the employee lived
outside an empowerment zone, renewal community, or rural
renewal county;
● Wages paid to or incurred for services performed by a
summer youth employee before or after any 90-day period
between May 1 and September 15; and
● Wages for services of replacement workers during a strike
or lockout.

Member of Controlled Group or Business
Under Common Control
For purposes of figuring the credit, all members of a controlled
group of corporations (as defined in section 52(a)) and all
members of a group of businesses under common control (as
defined in section 52(b)), are treated as a single taxpayer. As a
member, compute your credit based on your proportionate
share of qualified wages giving rise to the group’s work

2
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 5884, PAGE 3 of 4
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432 mm (17") 3 279 mm (11") VERTICAL FOLD IN MIDDLE
PERFORATE: ON FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 5884 (2007)

Page

opportunity credit. Enter your share of the credit on line 2.
Attach a statement showing how your share of the credit was
figured, and enter “See attached” next to the entry space for
line 2.

Specific Instructions
Part I. Current Year Credit
Lines 1a, 1b, and 1c

3

Activity Credit Limitations (for individuals, estates, and trusts),
or Form 8810, Corporate Passive Activity Losses and Credit
Limitations (for corporations).

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Enter on the applicable line and multiply by the percentage
shown the total qualified first- or second-year wages paid to
or incurred for employees who are members of a targeted
group. Qualified first-year wages are qualified wages you paid
or incurred for work performed during the 1-year period
beginning on the date the individual begins work for you.
Qualified second-year wages are qualified wages you paid or
incurred to certified long-term family assistance recipients for
work performed during the 1-year period beginning on the day
after the last day of the 1-year wage period.
The amount of qualified first-year wages and the amount of
qualified second-year wages that may be taken into account
for any employee certified as a long-term family assistance
recipient is limited to $10,000 per year. The amount of
qualified first-year wages that may be taken into account for
any employee certified as a qualified veteran entitled to
compensation for a service-connected disability and who,
during the 1-year period ending on the hiring date, was either
(a) discharged or released from active duty in the U.S. Armed
Forces, or (b) unemployed for a period or periods totaling at
least 6 months, is limited to $12,000. The amount of qualified
first-year wages that may be taken into account for any
employee certified as a summer youth employee is limited to
$3,000. The amount of qualifed first-year wages that may be
taken into account for an employee certified (if required) as a
member of any other targeted group is $6,000.
Successor employer. For successor employers, the 1- or
2-year period begins on the date the employee began work for
the previous employer and any qualified first- or second-year
wages paid or incurred by the successor employer are
reduced by the qualified first or second-year wages paid or
incurred by the previous employer. See section 51(k)(1) and
Regulations section 1.51-1(h).
A successor employer is an employer that acquires
substantially all of the property used in a trade or business (or
a separate unit thereof) of another employer (the previous
employer) and immediately after the acquisition, the successor
employs in his or her trade or business an individual who was
employed immediately prior to the acquisition in the trade or
business of the previous employer.
Line 2
In general, you must reduce your deduction for salaries and
wages by the amount on line 2. This is required even if you
cannot take the full credit this year and must carry part of it
back or forward. If you capitalized any costs on which you
figured the credit, reduce the amount capitalized by the credit
attributable to these costs.

Line 3
Enter the amount of credit that was allocated to you as a
partner, shareholder, patron of a cooperative, or beneficiary.

Line 5
Enter the amount included on line 4 that is from a passive
activity. Generally, a passive activity is a trade or business in
which you did not materially participate. Rental activities are
generally considered passive activities, whether or not you
materially participate. For details, see Form 8582-CR, Passive

Line 7

Enter the passive activity work opportunity credit allowed for
2007 from Form 8582-CR or Form 8810.

Line 8

Use line 8 to show any carryforward from 2006 of the New
York Liberty Zone business employee credit or any carryback
if you amend your 2007 return to carry back an unused work
opportunity credit from 2008. Report any carryforward from
2006 of the work opportunity credit on the Form 3800
carryforward line.

Line 10

Cooperatives. A cooperative described in section 1381(a)
must allocate to its patrons the credit in excess of its tax
liability limit. Therefore, to figure the unused amount of the
credit allocated to patrons, the cooperative must first figure its
tax liability. While any excess is allocated to patrons, any
credit recapture applies as if the cooperative had claimed the
entire credit.
Estates and trusts. Allocate the work opportunity credit on
line 9 between the estate or trust and the beneficiaries in the
same proportion as income was allocated and enter the
beneficiaries share on line 10.

Part II. Allowable Credit
The credit allowed for the current year may be limited based
on your tax liability. Use Part II to figure the allowable credit.

Line 12
Enter the regular tax before credits from the following line of
the appropriate form or schedule.
● Individuals: Form 1040, line 44; Form 1040NR, line 41.
● Corporations: Form 1120, Schedule J, line 2; or the
applicable line of your return.
● Estates and trusts: The sum of the amounts from Form
1041, Schedule G, lines 1a and 1b; or the amount from the
applicable line of your return.

Line 13
Enter the alternative minimum tax (AMT) from the following line
of the appropriate form or schedule.
● Individuals: Form 6251, line 35.
● Corporations: Form 4626, line 14.
● Estates and trusts: Form 1041, Schedule I, line 56.

Line 18
See section 38(c)(5) for special rules that apply to married
couples filing separate returns, controlled corporate groups,
regulated investment companies, real estate investment
trusts, and estates and trusts.

Line 22
If you cannot use all of the credit because of the tax liability
limit, carry the unused credit back 1 year then forward up to
20 years. When carrying back the credit from 2007 to 2006,
use the 2006 Form 6478, Credit for Alcohol Used as Fuel, line
10, and enter “W” to the left of the entry space.
Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue laws
of the United States. You are required to give us the
information. We need it to ensure that you are complying with
these laws and to allow us to figure and collect the right
amount of tax.

2
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 5884, PAGE 4 of 4
MARGINS: TOP 13 mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 432 mm (17") 3 279 mm (11") VERTICAL FOLD IN MIDDLE
PERFORATE: ON FOLD
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 5884 (2007)

Page

You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by
section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated burden
for individual taxpayers filing this form is approved under OMB
control number 1545-0074 and is included in the estimates
shown in the instructions for their individual income tax return.
The estimated burden for all other taxpayers who file this form
is shown below.

Recordkeeping

4

X hr., XX min.

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Learning about the law
or the form

XX min.

Preparing and sending
the form to the IRS

XX min.

If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for
the tax return with which this form is filed.

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