OMB No. 1545-0219

Form 5884 Work Opportunity Credit

Department of the Treasury

Internal Revenue Service  Attach to your return. Attachment

Sequence No. 77

Name(s) shown on return Identifying number

Current Year Credit (Members of a controlled group, see instructions.)

1 Enter the total qualified first-year wages paid or incurred during the tax year, and multiply by the

percentage shown, for services of employees who are certified as members of a targeted group and

began work for you before January 1, 2002, and:

1a

Current year credit. Add lines 1a and 1b. You must subtract this amount from your deduction for

salaries and wages

2

2

If you are a— Then enter total of current year work opportunity credit(s) from—

Schedule K-1 (Form 1120S), lines 12d, 12e, or 13

Schedule K-1 (Form 1065), lines 12c, 12d, or 13

Schedule K-1 (Form 1041), line 14

Written statement from cooperative

a Shareholder

b Partner

c Beneficiary

d Patron

Work opportunity

credits from

pass-through

entities

3

3

Total current year work opportunity credit. Add lines 2 and 3. (S corporations, partnerships, estates,

trusts, cooperatives, regulated investment companies, and real estate investment trusts, see

instructions.)

4

4

Tax Liability Limit (See Who Must File Form 3800 to find out if you complete Part II or file Form 3800.)

Form 5884 (2001)

Part I

Part II



Cat. No. 13570D

Worked at least 120 hours but fewer than 400 hours $  25% (.25)

Worked at least 400 hours $  40% (.40)

a

b 1b

For Paperwork Reduction Act Notice, see page 3.

● Individuals. Enter the amount from Form 1040, line 40

5

Corporations. Enter the amount from Form 1120, Schedule J, line 3; Form 1120-A,

Part I, line 1; or the applicable line of your return

●

●

8a 8a

Credit for child and dependent care expenses (Form 2441, line 9) 8b

Credit for the elderly or the disabled (Schedule R (Form 1040), line 20)

b

8d

Foreign tax credit

d

e 8e

Possessions tax credit (Form 5735, line 17 or 27)

8f f

8g g

Credit for fuel from a nonconventional source

h

Qualified electric vehicle credit (Form 8834, line 20)

Add lines 8a through 8l 8m

Net income tax. Subtract line 8m from line 7. If zero, skip lines 10 through 13 and enter -0- on line 14 9

6 Alternative minimum tax:

● Individuals. Enter the amount from Form 6251, line 28

● Corporations. Enter the amount from Form 4626, line 15 6

● Estates and trusts. Enter the amount from Form 1041, Schedule I, line 39

9

10 Tentative minimum tax (see instructions) 10

12 Enter 25% (.25) of the excess, if any, of line 11 over $25,000 (see instructions)

Subtract line 13 from line 9. If zero or less, enter -0-

13 13

Work opportunity credit allowed for the current year. Enter the smaller of line 4 or line 14

here and on Form 1040, line 50; Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 4a;

Form 1041, Schedule G, line 2c; or the applicable line of your return 15



Mortgage interest credit (Form 8396, line 11)

c 8c

5 Regular tax before credits:

7 Add lines 5 and 6 7

11

Enter the greater of line 10 or line 12

11

12

i

Adoption credit (Form 8839, line 14) 8h

District of Columbia first-time homebuyer credit (Form 8859, line 11) 8i

j

k

l

Rate reduction credit (Form 1040, line 47)

Education credits (Form 8863, line 18)

8j

8k

Estates and trusts. Enter the sum of the amounts from Form 1041, Schedule G, lines 1a

and 1b, or the amount from the applicable line of your return

Net regular tax. Subtract line 8m from line 5. If zero or less, enter -0-

14 14



15

2001

Child tax credit (Form 1040, line 48)

8l

m
Form 5884 (2001) Page 2

● Qualified food stamp recipient, or

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

restrictions.

● More than half the wages received from you must be for

working in your trade or business.

● You may not claim a credit on wages that were paid to any

employee during any period for which you received payment

for the employee from a federally funded on-the-job training

program.

● The employee cannot be your relative or dependent. See

section 51(i) for other restrictions.

● The employee must not have worked for you previously.

● The wages cannot be for services of replacement workers

during a strike or lockout.

Qualified first-year wages are qualified wages for work

performed during the 1-year period beginning on the date

the individual begins work for you. The following rules apply

in determining qualified wages.

● Only the first $6,000 of wages paid or incurred during the

tax year for each employee are taken into account.

Specific Instructions

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

Note: If you only have a credit allocated to you from a

pass-through entity, skip lines 1 and 2 and go to line 3.

● Wages qualifying 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, the first $6,000 of

that employee’s wages subject to social security and

Medicare taxes are taken into account. For a special rule that

applies to railroad employees, see section 51(h)(1)(B).

● For each qualified summer youth employee, wages are

limited to those paid or incurred for any 90-day period

between May 1 and September 15 and may not exceed

$3,000. You cannot claim a credit for an employee who was

your employee in a prior period.

● You cannot include wages paid or incurred to a high-risk

or qualified summer youth employee for services performed

while the employee lived outside an empowerment zone or

enterprise community.

Section references are to the Internal Revenue Code.

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 on an amended return.

To claim the work opportunity credit, the employer 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. The employer must receive the certification

by the day the individual begins work or must complete

Form 8850, Pre-Screening Notice and Certification Request

for the Work Opportunity and Welfare-to-Work Credits, by the

day the employer offers 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 or incurred to

targeted-group employees during the tax year.

● The employee must have worked for you for at least 120

hours. For employees who have worked at least 120 hours

but fewer than 400 hours, the credit rate is 25%. For

employees who have worked at least 400 hours, the credit

rate is 40%.

General Instructions

If the employer completes Form 8850, it must be signed by

the individual and the employer and submitted to the SESA

by the 21st calendar day after the individual begins work. If

the SESA denies a certification 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 the

employer receives the notice of revocation do not qualify for

the credit.

● Qualified SSI recipient.

● Any work supplementation payments you received under

the Social Security Act reduce the amount of wages

qualifying for the credit.

Special instructions for controlled group members. The

group member proportionately contributing the most

first-year wages figures the group credit in Part I and skips

Part II. See sections 52(a) and 1563. On separate Forms

5884, that member and every other member of the group

should skip lines 1a and 1b and enter its share of the group

credit on line 2. Each member then completes lines 3, 4, and

5 through 15 (or Form 3800, if required) on its separate form.

Each member must attach to its Form 5884 a schedule

showing how the group credit was divided among all the

members. The members share the credit in the same

proportion that they contributed qualifying wages.

● You cannot claim the work opportunity credit with respect

to the wages of any employee that you use to figure the

welfare-to-work credit.

Enter on the applicable line the total qualified first-year

wages paid to employees certified as members of a targeted

group who began work for you before January 1, 2002,

A Change to Note

The work opportunity credit does not apply for employees

who begin work for you after December 31, 2001.

based on the number of hours that employee worked for

you. Multiply the wages you enter on each line by the

percentage shown on that line.
Form 5884 (2001) Page 3

Line 2

Who Must File Form 3800

● You capitalized any salaries and wages on which you

figured the credit. In this case, reduce your depreciable basis

by the amount of the credit on those salaries and wages.

● You used the full absorption method of inventory costing

that required you to reduce your basis in inventory for the

credit.

If either of the above exceptions applies, attach a

statement explaining why the amount on line 2 differs from

the amount by which you reduced your deduction.

Line 3

Line 4

Estates and trusts. The credit on line 4 is allocated between

the estate or trust and the beneficiaries in proportion to the

income allocable to each. On the dotted line next to line 4,

the estate or trust should enter its part of the total credit.

Label it “1041 Portion” and use this amount in Part II (or

Form 3800, if required) to figure the credit to claim on Form

1041.

S corporations and partnerships. Allocate the credit among

the shareholders or partners. Attach Form 5884 to the return

and on Schedule K-1 show the credit for each shareholder or

partner. Electing large partnerships, include this credit in

“general credits.”

Cooperatives. Most tax-exempt organizations cannot take

the credit; but a cooperative described in section 1381(a)

takes the credit to the extent it has tax liability. Any excess is

shared among its patrons.

Line 15

Line 12

Line 10

● More than one of the credits included in the general

business credit listed below,

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.

Regulated investment companies and real estate

investment trusts. Reduce the allowable credit to the

company’s or trust’s ratable share of the credit. For details,

see Regulations section 1.52-3(b).

Recordkeeping 7 hr., 39 min.

Learning about the law

or the form 1 hr.

Preparing and sending

the form to the IRS 1 hr., 9 min.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

average time is:

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.

The general business credit consists of the following

credits.

● Investment (Form 3468).

● Work opportunity (Form 5884).

● Alcohol used as fuel (Form 6478).

● Research (Form 6765).

● Low-income housing (Form 8586).

● Enhanced oil recovery (Form 8830).

● Renewable electricity production (Form 8835).

● Indian employment (Form 8845).

● Employer social security and Medicare taxes paid on

certain employee tips (Form 8846).

● Contributions to selected community development

corporations (Form 8847).

The empowerment zone employment credit (Form 8844),

while a component of the general business credit, is figured

separately on Form 8844 and is never carried to Form 3800.

● Disabled access (Form 8826).

● Trans-Alaska pipeline liability fund.

● Orphan drug (Form 8820).

● Welfare-to-work (Form 8861).

● Individuals: Form 6251, line 26.

● Corporations: Form 4626, line 13.

● Estates and trusts: Form 1041, Schedule I, line 37.

● A carryback or carryforward of any of the credits,

● A credit from passive activity, or

● General credits from an electing large partnership

(Schedule K-1, Form 1065-B).

Complete Form 3800, General Business Credit, instead of

completing Part II of Form 5884 to figure the tax liability limit

if for this year you have:

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. However, the following exceptions to this

rule apply.

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

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

If you have a credit from a passive activity, stop here and go

to Form 3800.

If you cannot use part of the credit because of the tax

liability limit (line 14 is smaller than line 4), carry it back 1

year then forward up to 20 years. See the Instructions for

Form 3800 for details.

See section 38(c)(3) 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.

Although you may not owe alternative minimum tax (AMT),

you generally must still compute the tentative minimum tax

(TMT) to figure your credit. For a small corporation exempt

from the AMT under section 55(e), enter zero. Otherwise,

complete and attach the applicable AMT form or schedule.

Enter on line 10 the TMT from the line shown below.

● New markets (Form 8874).