Form 5884 Work Opportunity Cost

Form

5884

OMB No. 1545-0219

Work Opportunity Credit

Department of the Treasury
Internal Revenue Service

▶ Attach

2010

Attachment
Sequence No. 77
Identifying number

to your tax return.

Name(s) shown on return

1

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 120 hours but fewer than 400 hours . . . . . $

× 25% (.25)

1a

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

× 40% (.40)

1b

× 50% (.50)

1c

c

Qualified second-year wages of employees certified as
long-term family assistance recipients . . . . . .

. $

2

Add lines 1a, 1b, and 1c. See instructions for the adjustment you must make to salaries and wages

2

3

Work opportunity credit from partnerships, S corporations, cooperatives, estates, and trusts

3

4

Add lines 2 and 3. Partnerships and S corporations, report this amount on Schedule K;
all others, go to line 5
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4

5

Work opportunity credit included on line 4 from passive activities (see instructions)

6

Subtract line 5 from line 4

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6

7

Work opportunity credit allowed for 2010 from a passive activity (see instructions) .

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7

8

Carryforward of any work opportunity credit that originated in a tax year that began after 2006
and carryforward from 2009 of the New York Liberty Zone business employee credit . . . .

8

Carryback of the work opportunity credit from 2011 (see instructions) .

9

9
10

11

12

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Add lines 6 through 9. Cooperatives, estates, and trusts, continue on to line 11. All others, report
this amount on Form 3800, line 29b . . . . . . . . . . . . . . . . . . . .

10

Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see
instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

Cooperatives, estates, and trusts, subtract line 11 from line 10. Report this amount on Form
3800, line 29b . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

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

What's New
• The targeted groups for certain unemployed veterans and
disconnected youth have expired for employees who begin
work after 2010.
• The targeted group for Hurricane Katrina employees has
expired for employees hired after August 27, 2009.
• Qualified wages do not include first-year wages paid to or
incurred for a qualified employee if you claim a social security

For Paperwork Reduction Act Notice, see instructions.

tax exemption for wages paid to the employee after March 18,
2010, and before January 1, 2011, on your Employer's Tax
Return (Form 941, etc.).

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.

Cat. No. 13570D

Form 5884 (2010)

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Form 5884 (2010)

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, PreScreening 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 was hired after August 27, 2005, and
before August 28, 2009, 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.
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,
• Qualified recipient of Temporary Assistance for Needy
Families (TANF),
• Qualified veteran,
• Qualified ex-felon,
• Designated community resident,
• Vocational rehabilitation referral,
• Summer youth employee,
• SNAP recipient,
• SSI recipient,
• Unemployed veteran, or
• Disconnected youth.
See the Instructions for Form 8850 and section 51(d) for
details and restrictions.

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;
• Wages for services of replacement workers during a strike or
lockout; and
• First-year wages paid to or incurred for a qualified employee if
you claim a social security tax exemption for wages paid to the
employee after March 18, 2010, and before January 1, 2011, on
your Employer's Tax Return (Form 941, etc.).

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
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
Current Year Credit
Lines 1a, 1b, and 1c
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 to 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 to or incurred
for 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,

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Form 5884 (2010)

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

Line 7
Enter the passive activity work opportunity credit allowed for
2010 from Form 8582-CR or Form 8810.

Line 8
Use line 8 to show any carryforward of the work opportunity
credit from a tax year that began after 2006. For carryforwards
of the credit from years prior to 2007, show such carryforwards
on line 6 of Form 3800.

Also use line 8 to show any carryforward from 2009 of the
New York Liberty Zone business employee credit. On the dotted
line next to line 8, enter “From Form 8884” and the amount.

Line 9
Use line 9 to show any carryback if you amend your 2010 return
to carry back an unused work opportunity credit from 2011.

Line 11
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
10 between the estate or trust and the beneficiaries in the same
proportion as income was allocated and enter the beneficiaries
share on line 11.
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.
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

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. 4 hr., 32 min.

Learning about the law
or the form . . . . .

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Preparing and sending
the form to the IRS . .

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1 hr., 6 min.

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. 1 hr.

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.