Instructions for Form 5884

Instructions for Form 5884

Department of the Treasury

Internal Revenue Service

(Rev. March 2021)

Work Opportunity Credit

Future Developments

Partnerships, S corporations, cooperatives, estates,

and trusts must file this form to claim the credit. All other

taxpayers aren't required to complete or file this form if

their only source for this credit is a partnership, S

corporation, cooperative, estate, or trust. Instead, they

can report this credit directly on Form 3800, General

Business Credit.

What’s New

TIP 5884-C to claim the work opportunity credit for

Section references are to the Internal Revenue Code

unless otherwise noted.

For the latest information about developments related to

Form 5884 and its instructions, such as legislation

enacted after they were published, go to

IRS.gov/Form5884.

The Taxpayer Certainty and Disaster Tax Relief Act of

2020 made the following changes.

Credit extension. The Taxpayer Certainty and Disaster

Tax Relief Act of 2019 extended the work opportunity

credit to cover employees who began work in 2020. The

Taxpayer Certainty and Disaster Tax Relief Act of 2020

extended the credit to cover employees who begin work

after 2020 and before 2026.

Coronavirus-related employee retention credit. You

may claim an employee retention credit on an

employment tax return such as Form 941, Employer's

QUARTERLY Federal Tax Return. Wages paid after

December 31, 2020, and before July 1, 2021, and used to

figure this coronavirus-related employee retention credit

can't also be used to figure a credit on Form 5884. See

Qualified Wages.

Credit for qualified sick and family leave wages. You

may claim a credit for qualified sick and family leave

wages on an employment tax return such as Form 941.

Wages paid after March 31, 2021, and before October 1,

2021, and used to figure that credit, can't also be used to

figure a credit on Form 5884. See Qualified Wages.

Certain tax-exempt organizations can use Form

certain wages paid to qualified veterans. See

Form 5884-C for details.

How To Claim the Credit

You must ask for and be issued a certification for each

employee from the state workforce agency (SWA)

(formerly known as the state employment security agency

(SESA)) of the state in which your business is located.

The certification proves that the employee is a member of

a targeted group. You must either:

• 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 and receive

the certification before you claim the credit.

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

and the individual and submitted to the SWA of the state

in which your business is located (where the employee

works) by the 28th calendar day after the date the

individual begins work.

If the credit expires and is retroactively extended,

TIP or a targeted group is added or modified, the IRS

Disaster-related employee retention credit. You may

claim a 2020 qualified disaster employee retention credit

on Form 5884-A, Employee Retention Credit for

Employers Affected by Qualified Disasters. Wages used

to figure that disaster-related employee retention credit

can't also be used to figure a credit on Form 5884. See

Qualified Wages.

may allow you more time to submit Form 8850 for

an individual who began work while the credit was expired

or for a reasonable time after it was extended, or is a

member of a new or modified targeted group. If more time

is allowed, we will provide details at IRS.gov/Form8850

and in revised Instructions for Form 8850.

General Instructions

If the SWA 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 individual, wages paid or incurred after

the date you receive the notice of revocation don't qualify

for the credit.

Purpose of Form

Use Form 5884 to claim the work opportunity credit for

qualified first- and/or second-year wages you paid to or

incurred for targeted group employees during the tax year.

Your business doesn't have to be located in an

empowerment zone or rural renewal county to qualify for

this credit.

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.

Mar 30, 2021

Targeted group employee. An employee is a member

of a targeted group if he or she began working for you

before 2026 and is a:

• Long-term family assistance recipient,

• Qualified recipient of Temporary Assistance for Needy

Families (TANF),

• Qualified veteran,

• Qualified ex-felon,

• Designated community resident,

Cat. No. 13571O

• Vocational rehabilitation referral,

• Summer youth employee,

• Supplemental Nutrition Assistance Program (SNAP)

Member of Controlled Group or

Business Under Common Control

benefits (food stamps) recipient,

• SSI recipient, or

• Qualified long-term unemployment recipient.

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

for details and restrictions.

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 employer. As a member, figure 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.

Qualified Wages

Wages qualifying for the credit have the same meaning as

wages subject to the Federal Unemployment Tax Act

(FUTA) (determined without regard to the $7,000 FUTA

tax wage base). 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).

Specific Instructions

Current Year Credit

Lines 1a, 1b, and 1c

The amount of qualified wages for any employee is

zero if:

• The employee didn't work for you for at least 120 hours,

• The employee worked for you previously,

• 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.

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 employee 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.

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;

• Wages paid to or incurred for a designated community

resident for services performed while the employee lived

outside an empowerment zone or rural renewal county;

• 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;

• Wages for services of replacement employees during a

strike or lockout;

• Wages paid to or incurred for any employee after

December 31, 2020, and before July 1, 2021, if you use

the same wages to claim the coronavirus-related

employee retention credit on an employment tax return

such as Form 941;

• Wages paid to or incurred for any employee after March

31, 2021, and before October 1, 2021, if you use the

same wages to claim the credit for qualified sick and

family leave wages on an employment tax return such as

Form 941; and

• Wages paid to or incurred for any employee generally

after December 27, 2019, and before April 17, 2021, if you

use the same wages to claim the 2020 qualified disaster

employee retention credit on Form 5884-A.

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 an employee certified as a qualified

veteran is limited to the following amounts.

• $6,000 for a qualified veteran certified as being either

(a) a member of a family receiving SNAP assistance (food

stamps) for at least a 3-month period during the 15-month

period ending on the hiring date, or (b) unemployed for a

period or periods totaling at least 4 weeks (whether or not

consecutive) but less than 6 months in the 1-year period

ending on the hiring date.

• $12,000 for a qualified veteran certified as being

entitled to compensation for a service-connected disability

and hired not more than 1 year after being discharged or

released from active duty in the U.S. Armed Forces.

• $14,000 for a qualified veteran certified as being

unemployed for a period or periods totaling at least 6

months (whether or not consecutive) in the 1-year period

ending on the hiring date.

• $24,000 for a qualified veteran certified as being

entitled to compensation for a service-connected

disability, and unemployed for a period or periods totaling

at least 6 months (whether or not consecutive), in the

1-year period ending on the hiring date.

Information about any future disaster credits that

reduce qualified wages may be posted under "Recent

Developments" at IRS.gov/Form5884.

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 qualified first-year wages that may be taken into

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Instructions for Form 5884 (Rev. 3-2021)

account for an employee certified as a member of any

other targeted group is $6,000.

Partnerships, S corporations, cooperatives, estates,

and trusts report the above credits on line 3. All other filers

figuring a separate credit on earlier lines also report the

above credits on line 3. All others not using earlier lines to

figure a separate credit can report the above credits

directly on Form 3800, Part III, line 4b.

Successor employer. For successor employers, the 1or 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).

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

employee who was employed immediately prior to the

acquisition in the trade or business of the previous

employer.

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.

If the cooperative is subject to the passive activity rules,

include on line 3 any Form 5884 credit from passive

activities disallowed for prior years and carried forward to

this year. Complete Form 8810, Corporate Passive

Activity Loss and Credit Limitations, to determine the

allowed credit that must be allocated to patrons. For

details, see the Instructions for Form 8810.

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 can't 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.

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.

If the estate or trust is subject to the passive activity

rules, include on line 3 any Form 5884 credit from passive

activities disallowed for prior years and carried forward to

this year. Complete Form 8582-CR, Passive Activity

Credit Limitations, to determine the allowed credit that

must be allocated between the estate or trust and the

beneficiaries. For details, see the Instructions for Form

8582-CR.

Line 3

Enter total work opportunity credits from:

• Schedule K-1 (Form 1065), Partner's Share of Income,

Deductions, Credits, etc., box 15 (code J);

• Schedule K-1 (Form 1120-S), Shareholder's Share of

Income, Deductions, Credits, etc., box 13 (code J);

• Schedule K-1 (Form 1041), Beneficiary's Share of

Income, Deductions, Credits, etc., box 13 (code F); or

• Form 1099-PATR, Taxable Distributions Received

From Cooperatives, box 11 (box 9 for 2019; box 8 before

2019), or other notice of credit allocation.

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 time needed to complete and file this form will vary depending on individual circumstances. The estimated burden

for individual and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123

and is included in the estimates shown in the instructions for their individual and business income tax return. The

estimated burden for all other taxpayers who file this form is shown below.

Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 hr.,

1 hr.,

2 hr.,

6 min.

15 min.

34 min.

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.

Instructions for Form 5884 (Rev. 3-2021)

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