Tax Credit for Hiring Veterans

Employers can cut costs and maximize profits by hiring veterans.

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If you've been thinking about hiring a new employee for your business, you can qualify for a special tax credit if you hire a veteran before January 1, 2014. This tax credit, which was scheduled to expire at the end of 2012, was extended through 2013 under the American Taxpayer Relief Act of 2012.

How Much Is the Credit?

The credit can be as high as $9,600 per qualified veteran hired by a for-profit employes or up to $6,240 for veterans hired nonprofit organizations. However, the exact amount of the credit depends on many factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, the hire date of the veteran, and the veteran’s first-year wages.

Who Qualifies As a Veteran?

To qualify as a veteran for purposes of the credit, a person must:

  • have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability, and
  • not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.

A veteran also qualifies for the credit if he or she is certified as:

  • a member of a family receiving food stamps for at least a 3-month period ending during the 12-month period ending on the hiring date
  • unemployed for at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date
  • unemployed for at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date
  • entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces, or
  • entitled to compensation for a service-connected disability and unemployed for at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.

Veteran Must Be Certified By the State

The employer must obtain certification from the State Workforce Agency that a hiree is a qualified veteran to claim the credit. The employer must complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. This form is filed with the appropriate state agency, with the IRS. The form must be filed within 28 days after the qualified veteran starts work. Some states accept Form 8850 electronically. For additional information about your State Workforce Agency, visit the Department of Labor Employment and Training Administration (ETA) Web site.

How Do You Claim the Credit?

For-profit organizations claim the tax credit as a general business credit on Form 3800 against their income tax. . See the instructions for Form 3800, General Business Credit, for more details.The veteran must work for the employer for at least 120 hours for the employer to claim the credit.

Visit the IRS.gov website and enter "WOTC" in the search field for forms and more details about the expanded tax credit for hiring veterans.

January 2013

by: , J.D.

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