Employers who hire certain veterans before the end of 2012 could qualify for expanded tax credits, but only if they act soon. The Work Opportunity Tax Credit (“WOTC”), as amended by the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011, may be claimed by employers for qualified veterans who are hired and begin work on or after November 22, 2011, but before January 1, 2013. Both tax-exempt organizations and for-profit businesses may qualify for the tax credit. Both tax-exempt organizations and for-profit businesses may qualify for the tax credit.
In order to be considered a veteran under the WOTC, the employee must: (1) have served in the U.S. Armed Forces on active duty for more than 180 days, not including training, or have been discharged from active duty due to a disability related to his or her service, and (2) not have a period of extended active duty of more than 90 days that ended during the 60 days prior to the employee’s hiring date.
In addition to these requirements, veterans must meet other specifications to be a “qualified veteran” for the purposes of the WOTC. To be a “qualified veteran,” the employee must be certified by their State Employment Security Agency (“SESA”) as being either: (1) a member of a family receiving food stamp assistance for at least three months during the twelve-month period ending on the hire date; (2) unemployed for an aggregate period of at least four weeks, but less than six months, during the twelve-month period ending on the hire date; (3) unemployed for an aggregate period of at least six months during the twelve-month period ending on the hire date; or, (4) entitled to compensation due to a service-related disability and having either a hire date of less than twelve months after discharge from active duty or an aggregate unemployment of at least six months during the twelve-month period ending on the hire date.
For employers who hire qualifying veterans under the WOTC, the maximum tax credit is $9,600 per employee for for-profit businesses, or $6,240 per employee for tax-exempt organizations. The actual amount of the tax credit for each qualifying veteran is based on several factors, including the number of hours the veteran works, the length of time the veteran was unemployed prior to his or her hire date, and the wages earned by the veteran during his or her first year with the employer. For-profit employers may claim the tax credit against their income taxes, while tax-exempt employers may claim the tax credit against their employer social security taxes.
In order to take advantage of this tax credit opportunity, an employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with the employer’s SESA within 28 days of the qualified veteran’s start date. After receiving certification that the employee is a qualified veteran under the WOTC, the employer may use Forms 5884 and 3800, for for-profit employers, or Form 5884-C, for tax-exempt employers, to claim the tax credits when filing its tax return.
If you have any questions regarding these issues, please contact your employment counsel at Smith, Gambrell, & Russell, LLP.