Last Updated : January 14, 2009
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5884

Form 5884

Work Opportunity Credit

PURPOSE OF THE FORM:

Use form 5884 to claim the work opportunity credit for Qualified First year wages the taxpayer paid or incurred for targeted group employees during the tax year. The tax payer's business does not have to be located in an empowerment zone , enterprise community, or renewal community to qualify for this credit.
The taxpayer can claim or elect not to claim the work opportunity credit any time within 3 years from the due date of his return on either his original return or an amended return.

TARGETED GROUP EMPLOYEE :
An employee is a member of a targeted group if he or she is a:

  • Hurricane Katrina Employee,
  • Qualified recipient of Temporary Assistance for Needy Families (TANF),
  • Qualified Veteran,
  • Qualified Ex-felon,
  • High Risk Youth,
  • Vocational Rehabilitation referral,
  • Qualified summer Youth employee,
  • Qualified food stamp recipient, or
  • Qualified SSI recipient.

However if , the taxpayer uses any wages of an employee to figure the welfare-to-work credit for any tax year, the employee is not treated as a member of a targeted group for that year.

QUALIFIED FIRST YEAR WAGES:
Qualified first year wages are wages paid or incurred for work performed during the 1 year period beginning on the date the targeted group member begins work for the taxpayer.The amount of Qualified first year wages that may be taken into account for any employee is limited to $6000 ($3000 for a Qualified summer Youth employee).

Qualified wages for any employee must be reduced by the amount of any work supplementation payments the taxpayer received under the social security Act.
The amount of Qualified wages for any employee is zero if:

  • The employee did not work for the taxpayer for at least 120 hours,
  • The employee worked for the taxpayer previously, unless the employee is a Hurricane Katrina Employee who was not in your employment on 28 August, 2005, and this is the taxpayer first hire of the employee after that date.
  • The employee is your dependent,
  • The employee is related to you (see section 51(i)(1)),
  • 50% or less of the wages the employee received from the taxpayer for whom he was working in his trade or business, or
  • The tax payer uses the employee wages to figure the welfare-to-work credit for the current year.

Qualified wages do not include:

  • Wages paid to any employee during any period for which the taxpayer received payment for the employee from a federally funded on the job training program;
  • Wages paid or incurred to a high risk or qualified summer youth employee for services performed while the employee lived outside an empowerment zone, enterprise community, or renewal community;
  • Wages paid or incurred for services performed by a qualified summer youth employee before of after any 90 day period between MAY 1 and September 15; and
  • Wages for services of replacement workers during a strike or lockout.

PART - I CURRENT YEAR CREDIT :

Use Lines 1 a , b or c as applicable for entering the qualified wages.

Line 1a :
Enter on line 1a inner box the total of qualified first year wages paid to employees who worked for at least 120 hours but less than 400 hours certified as members of targeted group. The program multiplies the qualified first year wages entered on line 1a inner by the percentage set on this line and enters the result on line 1a outer.

Line 1b:
Enter on line 1b inner box the total of qualified first year wages paid to employees who worked for more than 400 hours certified as members of targeted group. The program multiplies the qualified first year wages entered on line 1b inner by the percentage set on this line and enters the result on line 1b outer.

Line 1c:
Enter on line 1c inner box the total of qualified second year wages paid to employees who are certified as long term family assistance recipients. The program multiplies the qualified second year wages entered on line 1c inner by the percentage set on this line and enters the result on line 1c outer.

Line 2:
The program adds line 1a , line 1b and line 1c and enters the result on this line.

Line 3:
The amount on this line comes from schedule K-1P/S and schedule K-1ET line named Work opportunity credit.

Line 4:
The program adds line 2 and line 3 and enters the result on this line.

Line 5:
Enter on this line the amount included on line 4 that is from a passive activity. Generally Passive activity is a trade or business in which the taxpayer did not materially participate Rental activities are considered as passive activities whether or not the taxpayer did not materially participate. refer instructions of FORM 8582 CR or form 8810.

Line 6:
The program subtracts Line 5 amount from line 4 and enters the result on this line.

Line 7:
Enter the passive activity credit allowed for 2007 credit for work opportunity credit from FORM 8582CR or FORM 8810.

Line 8:
Carry forward : Enter on line 8 any carry forward of the credit from 2006. For carry forwards of the credit from years prior to 2006, show such carry forwards on line 6 of form 3800.
Carry back : Enter on line 8 any carry back if the taxpayer has amended his 2007 return to carry back an unused credit from 2008.

Line 9:
The program adds line 6 through 8 and enters the result on this line.

Line 10 and line 11:
These lines are not applicable to Individuals.


PART - II ALLOWABLE CREDIT :

Line 12:
The amount on this line comes from FORM 1040 line 44 (tax) or FORM 1040NR line 41(tax).

Line 13:
The amount on this line comes from FORM 6251 line 35 (alternative Minimum Tax).

Line 14:
The program adds line 12 and line 13 and enters the result on this line.

Line 15a:
The amount on this line comes from FORM 1040 :
total of line 47 (child and dependent care benefits), line 48 ( credit for elderly and disabled) , line 49 (education credits), Line 50 (residential energy credits) , line 52 (child tax credit) , line 53 ( Retirement savings contribution credit) , line 54 ( form 8396 line 13) , (form 8859 line 13) , (form 8839 line 18) .
OR from FORM 1040NR:
total of line 44 (child & dependent care benefits) , line 45 (residential energy credits) , line 47 (child tax credit) , line 48 (retirement savings contribution credit) , line 49 ( form 8396 line 13) , (form 8859 line 13) , (form 8839 line 18) .

Line 15b:
The amount on this line comes from FORM 1040 line 51 (foreign tax credit) or FORM 1040NR line 46(foreign tax credit).

Line 15c:
The amount on this line comes from Form 8834 line 20 (qualified electric vehicle credit).

Line 15d:
The amount on this line comes from Form 8910 line 18 (Alternative Motor vehicle credit).

Line 15e:
The amount on this line comes from Form 8911 line 19 (Alternative Fuel vehicle Refueling property credit).

Line 15f:
The program adds line 15a through line 15e and enters the result here.

Line 16:
The program subtracts line 15f from line 14 and enters the result on this line. If the result is negative then it is set as zero.

Line 17:
The program subtracts line 15f from line 12 and enters the result on this line. If the result is negative then it is set as zero.

Line 18:
If line 17 is greater then $25000 then the program calculates 25% of Excess over $25000 and enters the result on this line.

Line 19:
The program subtracts line 18 from line 16 and enters the result on this line. If the result is negative then it is set as zero.

Line 20a:
The amount on this line comes from FORM 3800 line 19 (general business credit).

Line 20b:
The amount on this line comes from FORM 8844 line 26 (empowerment zone and renewal community employment credit).

Line 20c:
The program adds line 20a and line 20b and enters the result on this line.

Line 21:
The program subtracts line 20c from line 19 and enters the result on this line. If the result is negative then it is set as zero.

Line 22:
The program enters the lower of line 9 or line 21 here and reports this amount on FORM 1040 line 55 or FORM 1040NR line 50.

Supported States

Supported States

Federal CA CO CT GA
IL MD MI NC NM NJ
NY OH PA SC VT
     

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