General Instructions For Form 5884 - 2007
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Form 5884 (2007)
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General Instructions
Hurricane Katrina employee. A Hurricane Katrina
employee is an employee who had a main home in the core
Section references are to the Internal Revenue Code unless
disaster area on August 28, 2005, and, within a two-year
otherwise noted.
period beginning on that date, was hired for a job whose
principal place of employment is in the core disaster area. The
What’s New
certification requirements described above do not apply to
The Small Business and Work Opportunity Tax Act of 2007
Hurricane Katrina employees. Instead, the worker must show
extended the work opportunity credit to cover employees
the employer reasonable evidence that the worker is a
who begin work for the employer before September 1, 2011.
Hurricane Katrina employee. An employer may use Form 8850
The Act also made the following additional changes.
to accept reasonable evidence that the worker is a Hurricane
Katrina employee. If the employer discovers that the worker is
For individuals who begin work for the employer after May
not a Hurricane Katrina employee, wages paid or incurred
25, 2007, the Act expanded the definition of a targeted
after the date of discovery will not qualify for the credit.
employee. For details, see the June 2007 revision of the
Instructions for Form 8850, Pre-Screening Notice and
Targeted group employee. An employee is a member of a
Certification Request for the Work Opportunity Credit.
targeted group if he or she is a:
For tax years beginning after December 31, 2006, the
Hurricane Katrina employee,
credit is no longer limited by the alternative minimum tax
Long-term family assistance recipient hired after December
rules so Form 5884 is no longer filed with Form 3800,
31, 2006 (if hired before January 1, 2007, see Form 8861,
General Business Credit. This means lines 5 through 8 are
Welfare-to-Work Credit).
now made to accommodate the passive activity rules and the
Qualified recipient of Temporary Assistance for Needy
carryback of any unused credit allowed that previously would
Families (TANF),
have been reported on Form 3800. Also, this means any
carryforward of the credit from tax years beginning before
Qualified veteran,
2007 cannot be shown on the Form 5884 currently. Such
Qualified ex-felon,
carryforwards must be shown on Form 3800.
Designated community resident,
Because of these changes, Form 5884 will now be used to
Vocational rehabilitation referral,
report carryforwards of the New York Liberty Zone business
Summer youth employee,
employee credit. These carryforwards were previously
Food stamp recipient, or
reported on Form 8835, Renewable Electricity, Refined Coal,
and Indian Coal Production Credit.
SSI recipient.
See the Instructions for Form 8850 and section 51(d) for
The Tax Relief and Health Care Act of 2006 added certified
details and restrictions.
long-term family assistance recipients who begin work for you
after December 31, 2006, to the list of targeted groups. Line
Qualified Wages
1c is added to Form 5884 because certain qualified
Wages qualifying for the credit generally have the same
second-year wages paid to or incurred for these individuals
meaning as wages subject to the Federal Unemployment Tax
are used to figure the credit.
Act (FUTA). If the work performed by any employee during
more than half of any pay period qualifies under FUTA as
Purpose of Form
agricultural labor, that employee’s wages subject to social
Use Form 5884 to claim the work opportunity credit for
security and Medicare taxes are qualified wages. For a special
qualified first- or second-year wages you paid to or incurred
rule that applies to railroad employees, see section 51(h)(1)(B).
for targeted group employees during the tax year. Your
Qualified wages for any employee must be reduced by the
business does not have to be located in an empowerment
amount of any work supplementation payments you received
zone, renewal community, or rural renewal county to qualify
under the Social Security Act for the employee.
for this credit.
The amount of qualified wages for any employee is zero if:
You can claim or elect not to claim the work opportunity
The employee did not work for you for at least 120 hours,
credit any time within 3 years from the due date of your
The employee worked for you previously, unless the
return on either your original return or an amended return.
employee is a Hurricane Katrina employee who was not in
How To Claim the Credit
your employment on August 28, 2005, and this is your first
hire of the employee after that date,
Generally, you must request and be issued a certification for
The employee is your dependent,
each employee from the state employment security agency
(SESA). The certification proves that the employee is a
The employee is related to you (see section 51(i)(1)), or
member of a targeted group. You must receive the
50% or less of the wages the employee received from you
certification by the day the individual begins work or
were for working in your trade or business.
complete Form 8850, Pre-Screening Notice and Certification
Qualified wages do not include:
Request for the Work Opportunity Credit, on or before the
Wages paid to or incurred for any employee during any
day you offer the individual a job.
period for which you received payment for the employee from
If you complete Form 8850, it must be signed by you and
a federally funded on-the-job training program;
the individual and submitted to the SESA by the 28th
Wages paid to or incurred for a summer youth employee for
calendar day after the individual begins work. If the SESA
services performed while the employee lived outside an
denies the request, it will provide a written explanation of the
empowerment zone or renewal community;
reason for denial. If a certification is revoked because it was
Wages paid to or incurred for a designated community
based on false information provided by the worker, wages
resident for services performed while the employee lived
paid or incurred after the date you receive the notice of
outside an empowerment zone, renewal community, or rural
revocation do not qualify for the credit.
renewal county;
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