Employers Take Advantage of Tax Credit to Hire U.S. Veterans

by John Vogel, HireVeterans.com

Hiring U.S. military veterans can save your company a ton of money through the use of the Work Opportunity Tax Credit (WOTC). This most excellent tax credit is available on the IRS web site through IRS Form 5884.  It is for employers that hire certain categories of U.S. Veterans.

All thanks to The American Recovery and Reinvestment Act of 2009  (see provision Subtitle C – Tax Incentives for Business, Part III – Incentives For New Jobs on page 223)  there is a new U.S. Veteran category eligible for the WOTC.

For a limited time (Jan. 1, 2009 – Dec. 31, 2010) employers can take a maximum tax credit of $2,400 per veteran for any U.S. Veteran and not  just a service-disabled Veteran, who was:

  • Discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date –  AND –
  • In receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1- year period ending on the hiring date.

This new veteran category of WOTC is retroactive to apply to individuals who began work for an employer after Dec.  31, 2008.

How Much Paperwork Must an Employer Do to Claim the Tax Credit?

Well, it turns out to be not too much.   So it make cents that employers make the effort to take this outstanding tax credit, not just for their bottom line but for our U.S. Veterans who've truly worked to defend and protect our country.  The people want our U.S. Veterans back to work and they are giving Employers the incentive to do it.

Now depending on how you found the veteran applicant there are a total of two forms that require completion in order to attain certification.

If you found the U.S. Veteran through your state workforce agency (SWA), you will need to complete the employer’s portion of the:

If you found the U.S. Veteran on a commercial job board like HireVeterans.com or at a military job fair, or if he or she applied directly to your company, you will need to complete the employer’s portion of the:

If you found the U.S. Veteran through your state workforce agency (SWA), his or her veterans’ status may already be conditionally certified by the SWA.   If so, then the SWA or the applicant should provide you with a copy of the Conditional Certification, Work Opportunity Tax Credit, ETA Form 9062.  All you need to do is complete the employer portion of the form, which asks for your company name, the position/job title the applicant is being hired to fill, the employment start date, and the starting wage.

Both the Form 9062 and the Form 8850 must be sent back to the SWA no later than 28 days after the applicant starts work. If all information can be verified, you will receive a WOTC Employer Certification Form for that veteran.

If you found the veteran on a commercial job board or at a military job fair, or if he or she applied directly to your company, you can still request certification of his or her status by completing the Individual Characteristics Form (ICF) Work Opportunity Tax Credit Form 9061, collecting a copy of the required documentation (listed on the form) from the veteran, and providing it and the Form 8850 to your SWA for verification.

With the Form 9061, you must first determine if the applicant is willing to provide the required information. Prospective employees are not required to provide information of this sort to an employer – their participation must be voluntary. A simple way to do this is to make this a routine document that is presented to all applicants – attach a cover sheet indicating that status disclosure is completely voluntary and does not adversely affect hiring decisions.

If the applicant is willing to provide the required information, have him/her complete blocks 6-8 and 12-19 of the form. The form must be completed on or before the applicant is offered employment.

As with the earlier situation, both the Form 9061 and the Form 8850 must be sent back to the SWA no later than 28 days after the applicant starts work. If all information can be verified, you will receive a WOTC Employer Certification Form for that veteran. Those certification forms serve as documented proof that will back up the claim you make on the IRS Form 5884 when your company files its taxes.

Note that the language on Forms 9061 and 8850 has not yet been updated to reflect the new veteran category, and it is yet undetermined whether the forms will ever be updated, given the relatively short duration this new category is in effect. I’ve spoken with a few state WOTC coordinators and their advice is to just write in the category “unemployed veteran” across the top of the form.

The WOTC can be carried back one year or forward 20 years, which is especially helpful for smaller businesses who may not have enough tax liability this year to take the full credit, but who have hired qualified veterans and are otherwise entitled to the credit.

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