New Tax Credits for Hiring Veterans

The Work Opportunity Tax Credit ("WOTC"), scheduled to expire in 2011, was revised and extended on November 21, 2011. It is now two credits, the Wounded Warrior WOTC and the Returning Heroes WOTC. These credits can be worth as much as $9,600 for each qualified veteran hired after November 21, 2011 and before January 1, 2013.

The credits are based on 40% of first year wages paid to each qualified veteran, with certain limits. The Wounded Warrior Credit is limited to $2,400 per veteran who has been unemployed at least 4 weeks, and $5,600 per veteran who has been unemployed more than six months. The Returning Heroes Credit applies when hiring veterans with service-connected disabilities; this credit can be as much as $9,600 per veteran who has been unemployed more than six months, or $4,800 per veteran who qualifies as a food stamp recipient.

The credits generally require certification of eligibility by completing a prescreening notice on Form 8850 on or before the veteran is offered employment, and submitting From 8850 to a designated state agency within 28 days of the start of employment. However, there is important transition relief: for any qualified veteran hired after 11/22/11 and before 5/22/12, the Form 8850 may be submitted up to 6/19/12 and still be considered timely. For hires on or after 5/22/12, the 28 day deadline applies. (It appears that the transition relief applies to submitting Form 8850, and may not change the requirement that Form 8850 be completed before offering employment.)

The credits are also available to qualified tax exempt organizations, with some modifications.

If you are considering hiring someone who may meet the requirements for either of these credits, it is very important to comply with the prescreening procedures. Get a copy of Form 8850 and instructions from and find out how to preserve your credit.