As part of the repeal of the three percent withholding requirement on federal contractors, Senate members added the VOW to Hire Heroes Bill to H.R. 674 on November 10, 2011. This amendment provides tax credits for employers that hire military veterans and increases certain existing credits for companies that hire veterans with service-connected disabilities.
The Work Opportunity Credit (WOTC) provides tax credits to employers for hiring individuals from targeted groups. As part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, the WOTC was extended through December 31, 2011. Groups targeted as eligible for the WOTC included among others, families receiving Temporary Assistance for Needy Families (TANF) and qualified veterans– those currently receiving food stamps or those with service-connected disabilities.
The VOW to Hire Heroes Bill of 2011 enhances the WOTC by creating the Returning Heroes and Wounded Warriors Tax Credits and extends the WOTC credit for one year for those hiring qualified veterans before December 31, 2012.
Returning Heroes Tax Credit: provides employers a tax credit of up to $2,400 for hiring veterans who have been looking for employment for less than six months or a credit of up to $5,600 per employee for those veterans who have searched for employment for more than six months.
Wounded Warriors Tax Credit: enables employers to receive up to a $9,600-per-employee tax credit for hiring veterans with service-connected disabilities and who have been looking for employment for more than six months.
Based upon the specifics of the employment situation, employers may be eligible for a WOTC if they hire a qualified veteran receiving food stamps or a qualified veteran whose service-connected disabilities do not meet the criteria for the Wounded Warriors Tax Credit.
Both taxable and tax-exempt employers are eligible to claim the new hiring incentive credits. A tax-exempt employer for the purposes of the credit is an organization described in IRC §501(c) and exempt from tax under §501(a).
To be eligible for the WOTC, state workforce agencies will need to certify that individuals are members of a targeted group for which the credit was designed. Employers must complete Form 8850, Pre-Screening Notice and Certification for Work Opportunity Tax Credit. Provisions to expedite the certification of individuals as veterans were included in the legislation. Form 8850 must be filed with the respective state workforce agency no later than 28 days after the new hire begins employment.
The Returning Heroes and Wounded Warriors Tax Credits apply to individuals hired after the legislation’s enactment date. President Obama has voiced his support for the bill; therefore, the bill should be signed into law in the near future. The credits are scheduled to expire after December 31, 2012.
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