OMB No. 1545-0219 Form 5884 Work Opportunity Credit

Department of the Treasury

Internal Revenue Service © Attach to your tax return. AttachmentSequence No. 77

Name(s) shown on return Identifying number

1 Enter on the applicable line below the total qualified first-year wages paid or incurred during the

tax year, and multiply by the percentage shown, for services of employees who began work for

you before the applicable date in the instructions and are certified (if required) as members of a

targeted group.

1a

2 Add lines 1a and 1b. See instructions for the adjustment you must make for salaries and wages 2

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

Add lines 2 and 3. Cooperatives, estates, and trusts, go to line 5; partnerships and S corporations, 

report this amount on Schedule K; all others, report this amount on the applicable line of Form

3800 (e.g., line 1b of the 2006 Form 3800) 

4

4

Employees who worked for you at least 120 hours but fewer than

400 hours $ 3 25% (.25)

Employees who worked for you at least 400 hours $ 3 40% (.40)

a

b 1b

6 Cooperatives, estates, and trusts, subtract line 5 from line 4. Report the amount on the applicable 

line of Form 3800 (e.g., line 1b of the 2006 Form 3800) 

(Rev. December 2006)

Amount allocated to the patrons of the cooperative or the beneficiaries of the estate or trust

(see instructions) 

5

5

6

For Paperwork Reduction Act Notice, see instructions. Cat. No. 13570D Form 5884 (Rev. 12-2006)

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.

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

Purpose of Form

Use Form 5884 to claim the work opportunity credit for

qualified first-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, enterprise

community, or renewal community to qualify for this credit.

General Instructions

If you complete Form 8850, it must be signed by you and

the individual and submitted to the SESA by the 21st

calendar day after the individual begins work (the 28th day if

the employee begins work after December 31, 2006). 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 after the date you receive the notice of

revocation do not qualify for the credit.

The tax liability limit is no longer figured on this form;

instead, it must be figured on Form 3800, General Business

Credit.

What’s New

Taxpayers that are not partnerships, S corporations,

cooperatives, estates, or trusts, and whose only source of

this credit is from those pass-through entities, are not

required to complete or file this form. Instead, they can

report this credit directly on line 1b of Form 3800.

The IRS will revise this December 2006 version of the form

only when necessary. Continue to use this version for tax

years beginning after 2005 until a new revision is issued.

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

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

The Tax Relief and Health Care Act of 2006 extended the

work opportunity credit to cover employees who begin work

for the employer before January 1, 2008.

For employees who begin work for the employer after

December 31, 2006, the act also expanded the definition of a

targeted group employee, and increased the timeframe for

submitting Form 8850. For more information on these

changes, see Publication 553, Highlights of 2006 Tax

Changes.
Form 5884 (Rev. 12-2006) Page 2

● Qualified food stamp recipient, or

See Form 8850 and section 51(d) for details and restrictions.

Specific Instructions

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,

● High-risk youth,

● Vocational rehabilitation referral,

● Qualified summer youth employee,

Lines 1a and 1b

● Qualified 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)),

● 50% or less of the wages the employee received from you

were for working in your trade or business, or

● You use any of the employee’s 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

you 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 or after any 90-day

period between May 1 and September 15; and

● Wages for services of replacement workers during a strike

or lockout.

However, if you use 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 you paid or incurred for work performed during the

1-year period beginning on the date the targeted group

member begins work for you. The amount of qualified wages

that may be taken into account for any employee is limited to

$6,000 ($3,000 for a qualified summer youth employee).

Wages qualifying for the credit generally have the same

meaning as wages (excluding tips) 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, the first $6,000 of that

employee’s wages subject to social security and Medicare

taxes qualify. 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.

● Hurricane Katrina employee,

Qualified Wages

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

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.

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/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-year

period begins on the date the employee first began work for

the previous employer and any qualified first-year wages paid

by the successor employer are reduced by the qualified

first-year wages paid by the previous employer. See section

51(k)(1) and Regulations section 1.51-1(h).

Enter on the applicable line the total qualified first-year wages

paid to employees who are members of a targeted group.

Multiply the wages you enter on each line by the percentage

shown on that line.

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.

Line 3

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

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

Member of controlled group or business under common

control. 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 first-year 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 write “See attached” next to the

entry space for line 2.

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.
Form 5884 (Rev. 12-2006) Page 3

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 2 hr., 37 min.

Learning about the law

or the form 53 min.

Preparing and sending

the form to the IRS 58 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.

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.

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.