Part I

OMB No. 1545-0219

Form 5884 Work Opportunity Credit

Department of the Treasury

Internal Revenue Service © Attach to your tax return. Attachment

Sequence No. 77

Name(s) shown on return Identifying number

1 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 (if required) as members of a targeted group.

1a

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

wages

2

2

3 Work opportunity credit from partnerships, S corporations, cooperatives, estates, and trusts 3

Add lines 2 and 3. Partnerships and S corporations, report this amount on Schedule K; all others, 

go to line 5

4

4

Qualified first-year wages of employees who worked for you at least 

120 hours but fewer than 400 hours $ 3 25% (.25)

Qualified first-year wages of employees who worked for you at

least 400 hours $ 3 40% (.40)

a

b

1b

10 Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see

instructions) 

Add lines 6 through 8. Cooperatives, estates, and trusts, continue on to line 10. All others, use

this amount to complete Part II

9

9

10

Qualified second-year wages of employees certified as long-term

family assistance recipients $ 3 50% (.50)

c

1c

2007

Part II

Current Year Credit

5 Work opportunity credit included on line 4 from passive activities (see instructions) 5

6 Subtract line 5 from line 4 6

7 Work opportunity credit allowed for 2007 from a passive activity (see instructions) 7

Carryforward from 2006 of the New York Liberty Zone business employee credit and carryback

from 2008 of the work opportunity credit (see instructions)

8

8

11 Cooperatives, estates, and trusts, subtract line 10 from line 9. Use this amount to complete

Part II 11

Allowable Credit

12 Regular tax before credits (see instructions) 12

13 Alternative minimum tax (see instructions) 13

14 Add lines 12 and 13 14

15a Credits from Form 1040, lines 47 through 50 and 52 through 54 (or

Form 1040NR, lines 44, 45, and 47 through 49) 15a

b Foreign tax credit 15b

c Credits from Forms 5735 and 8834 15c

d Non-business alternative motor vehicle credit (Form 8910, line 18) 15d

Non-business alternative fuel vehicle refueling property credit (Form 

8911, line 19) 15e

e

Add lines 15a through 15e 15f f

16 Net income tax. Subtract line 15f from line 14. If zero, skip lines 17 through 20 and enter -0- on line 21 16

17 Net regular tax. Subtract line 15f from line 12. If zero or less, enter -0- 17

18 Enter 25% (.25) of the excess, if any, of line 17 over $25,000 (see instructions) 18

19 Subtract line 18 from line 16. If zero or less, enter -0- 19

20a General business credit (Form 3800, line 19) 20a

Empowerment zone and renewal community employment credit

(Form 8844, line 26) 20b

b

c Add lines 20a and 20b 20c

21 Subtract line 20c from line 19. If zero or less, enter -0- 21

22 Credit allowed for the current year. Cooperatives, estates, and trusts. Enter the smaller of line 

11 or 21. Report this amount on Form 1120-C, Schedule J, line 5c; or Form 1041, Schedule G,

line 2c. If line 21 is smaller than line 11, see instructions. All others. Enter the smaller of line 9 or 

21. Report this amount on Form 1040, line 55; Form 1040NR, line 50; Form 1120, Schedule J, line 

5c; or the applicable line of your return. If line 21 is smaller than line 9, see instructions 22
Form 5884 (2007) Page 2

● Food stamp recipient, or

See the Instructions for Form 8850 and section 51(d) for

details and restrictions.

Targeted group employee. An employee is a member of a

targeted group if he or she is a:

● Qualified recipient of Temporary Assistance for Needy

Families (TANF),

● Qualified veteran,

● Qualified ex-felon,

● Designated community resident,

● Vocational rehabilitation referral,

● Summer youth employee,

● SSI recipient.

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, unless the

employee is a Hurricane Katrina employee who was not in

your employment on August 28, 2005, and this is your first

hire of the employee after that date,

● 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 or renewal community;

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.

● Hurricane Katrina employee,

Qualified Wages

Section references are to the Internal Revenue Code unless

otherwise noted.

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.

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 year. Your

business does not have to be located in an empowerment

zone, renewal community, or rural renewal county to qualify

for this credit.

General Instructions

What’s New

The Small Business and Work Opportunity Tax Act of 2007

extended the work opportunity credit to cover employees

who begin work for the employer before September 1, 2011.

The Act also made the following additional changes.

● For individuals who begin work for the employer after May

25, 2007, the Act expanded the definition of a targeted

employee. For details, see the June 2007 revision of the

Instructions for Form 8850, Pre-Screening Notice and

Certification Request for the Work Opportunity Credit.

● For tax years beginning after December 31, 2006, the

credit is no longer limited by the alternative minimum tax

rules so Form 5884 is no longer filed with Form 3800,

General Business Credit. This means lines 5 through 8 are

now made to accommodate the passive activity rules and the

carryback of any unused credit allowed that previously would

have been reported on Form 3800. Also, this means any

carryforward of the credit from tax years beginning before

2007 cannot be shown on the Form 5884 currently. Such

carryforwards must be shown on Form 3800.

Generally, 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.

How To Claim the Credit

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

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.

Hurricane Katrina employee. A Hurricane Katrina

employee is an employee who had a main home in the core

disaster area on August 28, 2005, and, within a two-year

period beginning on that date, was hired for a job whose

principal place of employment is in the core disaster area. The

certification requirements described above do not apply to

Hurricane Katrina employees. Instead, the worker must show

the employer reasonable evidence that the worker is a

Hurricane Katrina employee. An employer may use Form 8850

to accept reasonable evidence that the worker is a Hurricane

Katrina employee. If the employer discovers that the worker is

not a Hurricane Katrina employee, wages paid or incurred

after the date of discovery will not qualify for the credit.

● Long-term family assistance recipient hired after December

31, 2006 (if hired before January 1, 2007, see Form 8861,

Welfare-to-Work Credit).

● Wages paid to or incurred for a designated community

resident for services performed while the employee lived

outside an empowerment zone, renewal community, or rural

renewal county;

Because of these changes, Form 5884 will now be used to

report carryforwards of the New York Liberty Zone business

employee credit. These carryforwards were previously

reported on Form 8835, Renewable Electricity, Refined Coal,

and Indian Coal Production Credit.

The Tax Relief and Health Care Act of 2006 added certified

long-term family assistance recipients who begin work for you

after December 31, 2006, to the list of targeted groups. Line

1c is added to Form 5884 because certain qualified

second-year wages paid to or incurred for these individuals

are used to figure the credit.
Form 5884 (2007) Page 3

Specific Instructions

Lines 1a, 1b, and 1c

Line 2

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

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.

Successor employer. For successor employers, the 1- or

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).

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.

Line 5

Enter the amount included on line 4 that is from a passive

activity. Generally, a passive activity is a trade or business in

which you did not materially participate. Rental activities are

generally considered passive activities, whether or not you

materially participate. For details, see Form 8582-CR, Passive

Activity Credit Limitations (for individuals, estates, and trusts),

or Form 8810, Corporate Passive Activity Losses and Credit

Limitations (for corporations).

Line 3

Enter the amount of credit that was allocated to you as a

partner, shareholder, patron of a cooperative, or beneficiary.

Estates and trusts. Allocate the work opportunity credit on

line 9 between the estate or trust and the beneficiaries in the

same proportion as income was allocated and enter the

beneficiaries share on line 10.

Part II. Allowable Credit

Line 12

Enter the regular tax before credits from the following line of

the appropriate form or schedule.

● Estates and trusts: The sum of the amounts from Form

1041, Schedule G, lines 1a and 1b; or the amount from the

applicable line of your return.

Line 13

Enter the alternative minimum tax (AMT) from the following line

of the appropriate form or schedule.

● Individuals: Form 6251, line 35.

● Individuals: Form 1040, line 44; Form 1040NR, line 41.

● Corporations: Form 1120, Schedule J, line 2; or the

applicable line of your return.

● Corporations: Form 4626, line 14.

● Estates and trusts: Form 1041, Schedule I, line 56.

Line 18

See section 38(c)(5) for special rules that apply to married

couples filing separate returns, controlled corporate groups,

regulated investment companies, real estate investment

trusts, and estates and trusts.

Part I. Current Year Credit

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

any employee certified as a qualified veteran entitled to

compensation for a service-connected 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 qualifed first-year wages that may be

taken into account for an employee certified (if required) as a

member of any other targeted group is $6,000.

Line 8

Use line 8 to show any carryforward from 2006 of the New

York Liberty Zone business employee credit or any carryback

if you amend your 2007 return to carry back an unused work

opportunity credit from 2008. Report any carryforward from

2006 of the work opportunity credit on the Form 3800

carryforward line.

Line 10

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.

The credit allowed for the current year may be limited based

on your tax liability. Use Part II to figure the allowable credit.

Line 7

Enter the passive activity work opportunity credit allowed for

2007 from Form 8582-CR or Form 8810.

● 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.

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.

Member of Controlled Group or Business

Under Common Control

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.
Form 5884 (2007) Page 4

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.

Recordkeeping 8 hr., 36 min.

Learning about the law

or the form 1 hr.

Preparing and sending

the form to the IRS 1 hr., 10 min.

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.

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.

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.

If you cannot use all of the credit because of the tax liability

limit, carry the unused credit back 1 year then forward up to

20 years. When carrying back the credit from 2007 to 2006,

use the 2006 Form 6478, Credit for Alcohol Used as Fuel, line

10, and enter “W” to the left of the entry space.

Line 22