Many would agree that the skills and training taught in the military provide a great foundation for a new career once service has ended. But did you know that there may be a very nice tax benefit available for employers that are fortunate enough to hire a qualified veteran?
An often overlooked employer benefit is a tax return credit available to businesses who hire qualified vets before December 31, 2013. The up to $9,600 credit is part of the Work Opportunity Tax Credit (WOTC) and is included with other business related credits on the Form 3800, General Business Credits. Yes, you as an employer may get a tax credit up to almost ten thousand dollars for hiring some of the most qualified experienced workers in the market today.
Let’s take a look at the qualifications of the credit:
Hire a qualified veteran. To be considered a qualified veteran the individual must:
- Have served on active duty (doesn’t include 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 of more than 90 days that ended during the 60-day period ending on the hiring date.
- Be hired before December 31, 2013.
In addition, the veteran must be certified by the appropriate State Workforce Agency (SWA) as meeting one of the following:
- A member of a family receiving assistance under SNAP (food stamps) for at least a 3-month period that ended during the 12-month period ending on the hiring date.
- Unemployed for a total of at least 4 weeks but less than 6 months in the 1-year period ending on the hiring date.
- Unemployed for a total of at least 6 months 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.
- Entitled to compensation for a service-connected disability and unemployed for at last 6 months in the 1-year period ending on the hiring date.
Finally, the veteran must not be any of the following:
- Related to you, the employer
- Have worked for you at any time in the past
- Your dependent
- Work less than 120 hours during the year
The vet must complete and sign Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and provide you with the original. You must sign the Form 8850 and submit it to the appropriate (SWA) within 28 days of the hire date.
The credit is 40 percent of the no more than $24,000 wages paid to a qualifying vet that works at least 400 hours for the 12-month period beginning with the hiring date. The credit is reduced to 25 percent of the wages paid to qualifying vets who work at least 120 hours, but less than 400 hours.
Claim the credit using Form 5884, Work Opportunity Credit, and Form 3800, General Business Credits, for the year the wages are paid.
I often write of the complexity of our American Tax system, tax code, rules, deductions, credits and tax forms and the price of fairness is complexity. We certainly have a complex tax system and to get the most from your tax return and situation, you need to understand the rules, remain vigilant, monitor life changes and get professional help where needed. This credit for employing military veterans supports that philosophy. Hiring and employing a skilled and respectable resource -- an American veteran -- is a very rewarding experience. This tax credit is an added benefit to help ensure our service men and women can continue learning new skills as a civilian. What are you waiting for, hire a veteran today!