Last Updated : January 14, 2009
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8861

Form 8861

Welfare To Work Credit

PURPOSE OF THE FORM:

Use form 8861 to claim the welfare-to-work credit for wages he paid to or incurred for long term family assistance reciepents during the tax year. THe credit is 35% of Qualified first year wages and 50% of Qualified second year wages paid or incurred during the tax year.

A person can claim or elect not to claim the welfare-to-credit any time within 3 years from the due date of the return on either the original return or an amended return.

QUALIFIED WAGES:

Wages qaulifying for the credit generally have the same meaning as wages subject to the Federal Unemployment tax ACT (FUTA). For agricultural employees, if the work performed by any employee during more than half of any pay period qualifies under FUTA as agricultural labor, that employees wages subject to social security and medicare taxes are qualified wages.

They also include the following amounts the taxpayer paid or incurred for the employee that are excludable from the employees gross income.

  • Premiums and other amounts he paid or incurred under an accident and health plan excluded under section 105 and 106.
  • Educational assistance excluded under section 127, if paid or incurred to a person not related to the employer.
  • Dependent care benefits excluded under section 129.

    The amount of Qualified wages for any employee is zero if :
  • The employee did not work for the taxpayer for at least 400 hours or 180 days,
  • The employee worked for the taxpayer previously.
  • The employee is his dependent.
  • The employee is related to him OR
  • 50% or less of the wages the employee recieved from the taxpayer were for working in his trade or business.

    Qualified wages do not include:
  • Wages paid to any employee during any period for which he recieved payment for the employee from a federally funded on the job training program, and
  • Wages for services of replacementworkers during a strike or lockout at a plant or facility.

Line 1a:
Enter the Qualified first year wages of the employees certified as long term family assistance reciepents.This amount is multiplied by 35%.
Qualified first year wages are qualified wages paid or incurred by the taxpayer for work performed during the 1-year period beginning on the day after the last day of the first year wage period.The amount of qualified first year wages for any employee and qualified second year wages is limited to $10000 per year per employee.

Line 1b:
Enter the Qualified second year wages of the employees certified as long term family assistance reciepents.This amount is mulitplied by 50% .
Qualified second year wages are qualified wages paid or incurred by the taxpayer for work performed during the 1-year period beginning on the day after the last day of the first year wage period.The amount of qualified first year wages for any employee and qualified second year wages is limited to $10000 per year per employee.

Line 2a:
The program adds line 1a and line 1b and enter the result on this line.
In general, the taxpayer must reduce his eduction for salaried and wages by the anount o line 2.If the taxpayer capitalised any costs on which he figured the credit , reduce the amount capitalised by the credit attributable to these costs.

Line 3:
The amount on this line comes from schedule K-1 PS or K-1ET named Welfare to work credit.

Line 4:
The program adds line 2 and 3 and enters the result on this line and this line is reported on FORM 3800.

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