New Tax Credit Available to Businesses Hiring Veterans
The VOW to Hire Heroes Act of 2011 was signed into law by President Obama in November of 2011. Altering the Work Opportunity Tax Credit (WOTC), the act provides two tax incentives for employers to hire veterans between November 22, 2011 and December 31, 2012.
The “Returning Heroes” tax credit provides a credit to for-profit employers of up to $2,400 for hiring veterans who have been unemployed for more than four weeks, or up to $5,600 for hiring veterans who have been out of work for over six months. The maximum credit available to certain tax-exempt organizations is $1,560 for hiring a veteran who has been unemployed for more than four weeks, or $3,640 for hiring a veteran who has been out of work for over six months.
The “Wounded Warrior” tax credit continues the previous WOTC credit to employers for hiring veterans with service-connected disabilities; however, it now provides a new credit of as much as $9,600 to for-profit businesses and up to $6,240 to certain tax-exempt organizations that hire a veteran with a service-connected disability who has been unemployed for more than six months.
To qualify for the credit, employers must certify individuals via Form 8850, Pre-Screening Notice and Certification Request, within the first 28 days of hiring a veteran.
For-profit employers can use IRS Form 5884 to determine the amount of the credit, which can be claimed as a general business credit on Form 3800. Tax-exempt employers must use Form 5884-C, which is a stand-alone form for requesting a refund of tax money. Requests for a refund of tax dollars can be submitted only after the period for which wages and taxes were reportable and a new form will need to be submitted for each quarter in which the credit is applicable.
Information on the Returning Heroes and Wounded Warriors Tax Credits is available on the White House website and on the VOW to Hire Heroes Act - Frequently Asked Questions and Answers page of the IRS website.
The material contained on this page is for informational purposes only and is current as of the date of publication. CompuPay is not a legal, tax or financial adviser and makes no claims as such. For tax, financial or legal advice, please seek a professional.