Work Opportunity Credit

Instructions for Form 5884
(Rev. December 2016)

Department of the Treasury
Internal Revenue Service

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

Future Developments

For the latest information about developments related to
Form 5884 and its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form5884.

General Instructions
Purpose of Form

Use Form 5884 to claim the work opportunity credit for
qualified first- and/or second-year wages you paid to or
incurred for targeted group employees during the tax year.
Your business doesn't 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.
Partnerships, S corporations, cooperatives, estates,
and trusts must file this form to claim the credit. All other
taxpayers aren't required to complete or file this form if
their only source for this credit is a partnership, S
corporation, cooperative, estate, or trust. Instead, they
can report this credit directly on Form 3800, General
Business Credit.

How To Claim the Credit

You must ask for and be issued a certification for each
employee from the state workforce agency (SWA)
(formerly known as the state employment security agency
(SESA)) of the state in which your business is located.
The certification proves that the employee is a member of
a targeted group. You must either:
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 and receive
the certification before you claim the credit.
If you complete Form 8850, it must be signed by you
and the individual and submitted to the SWA of the state
in which your business is located (where the employee
works) by the 28th calendar day after the individual begins
work.
If the SWA 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 don't qualify for
the credit.
Dec 09, 2016

Targeted group employee. An employee is a member
of a targeted group if he or she began working for you
before 2020 and 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,
Supplemental Nutrition Assistance Program (SNAP)
benefits (food stamps) recipient,
SSI recipient, or
Qualified long-term unemployment recipient.
See the Instructions for Form 8850 and section 51(d)
for details and restrictions.

Qualified Wages

Wages qualifying for the credit have the same meaning as
wages subject to the Federal Unemployment Tax Act
(FUTA) (determined without regard to the $7,000 FUTA
tax wage base). 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 didn't 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;
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.

Cat. No. 13571O

Member of Controlled Group or
Business Under Common Control

account for an employee certified as a member of any
other targeted group is $6,000.
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
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.

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, figure 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

Line 2

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.

In general, you must reduce your deduction for salaries
and wages by the amount on line 2. This is required even
if you can't 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 total work opportunity credits from:
Schedule K-1 (Form 1065), Partner's Share of Income,
Deductions, Credits, etc., box 15 (code J);
Schedule K-1 (Form 1120S), Shareholder's Share of
Income, Deductions, Credits, etc., box 13 (code J);
Schedule K-1 (Form 1041), Beneficiary's Share of
Income, Deductions, Credits, etc., box 13 (code F); or
Form 1099-PATR, Taxable Distributions Received
From Cooperatives, box 8, or other notice of credit
allocation.

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 an employee certified as a qualified
veteran is limited to the following amounts.
$6,000 for a qualified veteran certified as being either
(a) a member of a family receiving SNAP assistance (food
stamps) for at least a 3-month period during the 15-month
period ending on the hiring date, or (b) unemployed for a
period or periods totaling at least 4 weeks (whether or not
consecutive) but less than 6 months in the 1-year period
ending on the hiring date.
$12,000 for a qualified veteran certified as being
entitled to compensation for a service-connected disability
and hired not more than 1 year after being discharged or
released from active duty in the U.S. Armed Forces.
$14,000 for a qualified veteran certified as being
unemployed for a period or periods totaling at least 6
months (whether or not consecutive) in the 1-year period
ending on the hiring date.
$24,000 for a qualified veteran certified as being
entitled to compensation for a service-connected
disability, and unemployed for a period or periods totaling
at least 6 months (whether or not consecutive), in the
1-year period ending on the hiring date.

Partnerships, S corporations, cooperatives, estates,
and trusts must always report the above credits on line 3.
All other filers figuring a separate credit on earlier lines
must also report the above credits on line 3. All others not
using earlier lines to figure a separate credit can report the
above credits directly on Form 3800, Part III, line 4b.

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.
If the cooperative is subject to the passive activity rules,
include on line 3 any Form 5884 credit from passive
activities disallowed for prior years and carried forward to
this year. Complete Form 8810, Corporate Passive
Activity Loss and Credit Limitations, to determine the
allowed credit that must be allocated to patrons. For
details, see the Instructions for Form 8810.

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
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Instructions for Form 5884 (December 2016)

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.

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.
If the estate or trust is subject to the passive activity
rules, include on line 3 any Form 5884 credit from passive
activities disallowed for prior years and carried forward to
this year. Complete Form 8582-CR, Passive Activity
Credit Limitations, to determine the allowed credit that
must be allocated between the estate or trust and the
beneficiaries. For details, see the Instructions for Form
8582-CR.

The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for individual and business taxpayers filing this
form is approved under OMB control number 1545-0074
and 1545-0123 and is included in the estimates shown in
the instructions for their individual and business income
tax return. The estimated burden for all other taxpayers
who file this form is shown below.

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.

Recordkeeping . . . . . . . . . . . . . . . . . . . . . .
Learning about the law or the form . . . . . . . . .
Preparing and sending the form to the IRS . . .

6 min.
15 min.
34 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.

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 for Form 5884 (December 2016)

3 hr.,
1 hr.,
2 hr.,

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