Form 5884 Work Opportunity Cost

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Form

5884

Department of the Treasury
Internal Revenue Service

Name(s) shown on return

1

OMB No. 1545-0219

Work Opportunity Credit
▶ Attach

2011

Attachment
Sequence No. 77
Identifying number

to your tax return.

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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 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

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

× 50% (.50)

1c

2

3
4

5
6

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

2

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

3

Add lines 2 and 3. Cooperatives, estates, and trusts, go to line 5. Partnerships and S
corporations, stop here and report this amount on Schedule K. All others, stop here
and report this amount on Form 3800, line 4b . . . . . . . . . . . . . . .

4

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

5

Cooperatives, estates, and trusts, subtract line 5 from line 4. Report this amount on
Form 3800, line 4b . . . . . . . . . . . . . . . . . . . . . . . . .

6

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

What's New
• The work opportunity credit is scheduled to expire for
employees who begin work after 2011. Do not report
wages paid or incurred to these employees on Form 5884
unless the credit is extended. See www.irs.gov/form5884
for the latest information about this credit.
• Renewal community designations expired at the end of
2009. Wages paid or incurred for services performed after
2009 by a designated community resident or summer
youth employee who lived in a renewal community may
no longer qualify for the work opportunity credit unless
the designation is extended.
• The carryforwards, carrybacks, and passive activity
limitations for this credit are no longer reported on this
form; instead, they must be reported on Form 3800,
General Business Credit.

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
For Paperwork Reduction Act Notice, see instructions.

year. Your business does not have to be located in an
empowerment zone 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.

Taxpayers, other than partnerships, S corporations,
cooperatives, estates, or trusts, whose only source of this
credit is from those pass-through entities, are not
required to complete or file this form. Instead, they can
report this credit directly on Form 3800.

How To Claim the Credit
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
Cat. No. 13570D

Form 5884 (2011)

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Form 5884 (2011)

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.
Targeted group employee. An employee is a member of
a targeted group if he or she is a:
• 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 (if he or she began working for you
before 2011), or
• Disconnected youth (if he or she began working for you
before 2011).
See the Instructions for Form 8850 and section 51(d) for
details and restrictions.

• 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.).

Qualified Wages

Lines 1a, 1b, and 1c

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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,
• 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;
• Wages paid to or incurred for a designated community
resident for services performed while the employee lived
outside an empowerment zone or rural renewal county;

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

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 longterm 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 serviceconnected 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 qualified first-year wages that
may be taken into account for an employee certified as a
member of any other targeted group is $6,000.

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Form 5884 (2011)

Successor employer. For successor employers, the 1or 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 secondyear 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

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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

Estates and trusts. Allocate the work opportunity credit
on line 4 between the estate or trust and the beneficiaries
in the same proportion as income was allocated and
enter the beneficiaries' share on line 5.

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

Line 5
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.

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 . . . . . . . . . . 4 hr., 32 min.
Learning about the law
or the form . . . . . . . . . . . . . . 1 hr.
Preparing and sending
the form to the IRS . . . . . . . . . 1 hr., 6 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.