The Work Opportunity Tax Credit (WOTC) has been around for many years. It gives employers an incentive to hire from 9 specified groups, such as people receiving public assistance. The WOTC expired on 12/31/11 for those 9 groups, but there is a good chance that it will be renewed retroactively, so if you hire from those groups, it's still a good idea to fill out the paperwork. See the end of this page.
Beginning 11/22/11, and through all of 2012, veterans who have been unemployed for at least 4 weeks are an eligible group.
Tax Credit for Hiring
Unemployed Veterans
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The amount of the tax credit for hiring veterans depends on three things:
- Wages (must work at least 120 hours)
- How long the vet was unemployed before being hired, and
- Whether or not he has a service-related disability.
Here is a summary of how the credit is calculated:
No disabilityDisabledUnemployedfirst $6000 wagesfirst $12,000 wages
first $6000 wagesfirst $12,000 wages4 weeks - 6 monthsx 40% = $2,400x40% = $4,800
x 40% = $2,400x40% = $4,800Unemployedfirst $14,000 wagesfirst $24,000
first $14,000 wagesfirst $24,000more than 6 monthsx40% = $5,600x40% = $9,600
x40% = $5,600x40% = $9,600There is quite a bit of paperwork involved in claiming the tax credit for hiring veterans:
1. By the day the job offer is made, complete page 1 of IRS Form 8850
2. After the veteran is hired, complete page 2 of the IRS form, plus ETA Form 9061. (If the veteran comes to you conditionally pre-approved by the state workforce agency, complete ETA Form 9062.)
3. Within 28 days, mail the IRS and ETA forms to the state workforce agency. Update: the IRS has extended the deadline for mailing the Form 8850 until 6/19/12 for vets hired by 5/22/12. After that, the 28-day rule will go back into effect.
The information above is a general outline of the tax credit for hiring veterans. Questions about your specific situation should be run by an experienced CPA.
Bess Kane, CPA
February, 2012
