As we approach the end of the year, a critical deadline looms for employers across the United States. The Work Opportunity Tax Credit (WOTC)—a vital federal incentive designed to encourage the hiring of individuals facing significant barriers to employment—is set to expire on December 31, 2025.
Despite its long history of bipartisan support, the credit was notably absent from the “Big Beautiful Bill” and the government funding legislation passed in November 2025. This signals that the program is on track for a lapse unless Congress takes immediate action.
For employers who rely on WOTC for their hiring strategies and financial planning, the silence from Capitol Hill is concerning. Here is what you need to know about the expiration, the potential for retroactive renewal, and the one critical step you must keep taking.
The Immediate Impact on Employers
If the ball drops on New Year’s Eve without a renewal, the immediate effects will be felt in two primary areas:
Reduced Hiring Incentives: The loss of the credit removes the financial “nudge” for employers to proactively recruit from target groups, such as veterans, ex-felons, and long-term unemployed individuals. Without this incentive, these candidates may face increased difficulty in finding employment.
Budgeting Disruption: Many organizations factor WOTC credits into their annual financial projections. A lapse creates a hole in the budget, potentially increasing unexpected tax liabilities and impacting the bottom line for the 2026 fiscal year.
The Golden Rule: Don’t Stop Filing (The 28-Day Rule)
If the credit expires on December 31, the most dangerous mistake an employer can make is to stop submitting paperwork.
The “28-Day Rule” remains in effect. Even during a legislative lapse, industry experts strongly advise that you continue to submit the required certification paperwork (IRS Form 8850 and ETA Form 9061/9062) to your State Workforce Agency (SWA).
Why? You must submit these forms within 28 days of the employee’s start date. If you fail to meet this deadline during the lapse, you cannot go back and fix it later. By filing on time now, you preserve your right to claim the credit retroactively if Congress renews the program later.
Will WOTC Be Renewed Retroactively?
While nothing is guaranteed in Washington, history is on the side of the employer.
Historical Precedent: Since its inception, WOTC has been extended 13 times, often retroactively.
The Pattern: Congress frequently uses omnibus spending packages or “tax-extender” bills to renew WOTC after it has technically expired.
The Mechanism: Typically, renewal legislation includes provisions to apply the credit to new hires made during the “gap” period—but only if the employer filed the necessary paperwork on time.
A Note on “Payments” and Backlogs
It is important to remember that WOTC is a reduction in tax liability, not a direct cash payment. However, the speed at which you can claim this reduction depends on State Workforce Agencies (SWAs).
As of December 2025, there is no single national figure for certification backlogs, but they are common. Processing times vary wildly by state and are influenced by staffing levels and application volume.
The Reality: In some jurisdictions, receiving the official determination that a hire is eligible can take months.
The Fix: For the most accurate timeline, contact your specific SWA WOTC unit or consult your tax service provider, as they often track real-time processing trends.
The Bottom Line: Compliance is Key
Given the failure to include WOTC in recent legislative packages, the prudent course of action is to assume a lapse but maintain perfect compliance.
Continue screening applicants and submitting your forms within the 28-day window for every eligible hire. If the program is renewed retroactively in 2026—as it has been many times before—your diligence during the expiration period will ensure you don’t leave money on the table.
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