There is still time to hire unemployed veterans and take advantage of a tax credit. The Returning Veterans Tax Credit was put in place by President Obama in November 2011 to encourage businesses to hire unemployed veterans. But, unless Congress and the President extend it, this tax credit will expire December 31.
How the Returning Veterans Tax Credit Works
For veterans hired between November 20, 2011, and December 31, 2012, a business may get a tax credit, depending on how long the returning veteran was unemployed. This tax credit is actually an expansion of the Work Opportunity Tax Credit (WOTC), which provides incentives for businesses to hire unemployed individuals in several targeted groups. If your business hires long-term unemployed veterans with service-related disabilities, the tax credit doubles.
Tax Credit Amounts
According to a recent IRS Notice, the tax credit is up to $2,400 for hiring veterans unemployed for an aggregate of four weeks to six months. The rules further provide a tax credit of up to $5,600 for hiring veterans unemployed more than six months. The maximum tax credit is $9,600 for employers who hire veterans with service-connected disabilities if such veterans have been looking for a job for more than six months.
How to Apply for the Returning Heroes Work Opportunity Tax Credit
- First, you must qualify for the credit by submitting IRS Form 8850 on or before the day you offer the individual the job. This request must be approved by your state's WOTC coordinator. The first part must be completed the day the job offer is made and the second part must be completed after the individual is hired. There are other forms that need to be completed; see the Department of Labor's WOTC web page for more information.
- Then, to claim the credit each year, you must submit IRS Form 5884, showing the total employees hired in each WOTC category.
As usual with the IRS, things are complicated. Check with the IRS or your tax advisor if you are considering hiring a veteran before the end of the year or you think your business might be eligible for a tax credit.
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