More organizations are hiring military veterans every day. In addition to benefiting from the skills, dedication and experience that veterans offer, qualifying employers can earn a tax credit for their commitment to hiring, training and retaining veterans.
Many of our clients, particularly government contractors, hire military veterans.
Let’s look at some of the tax credits available to employers who hire veterans.
Work Opportunity Tax Credit Program
The Work Opportunity Tax Credit (WOTC) Program incentivizes employers for hiring employees from targeted groups, veterans being among them. The list of targeted employees also includes long-term unemployment recipients and those between ages 18-40 who live in empowerment zones.
More specifically, according to an article on www.military.com,
This is a credit for new hires that begin work on or after January 1, 2016 through December 31, 2019, during which the individual is employed no less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under state or federal law. For WOTC-certified new hires working at least 120 hours, employers can claim 25% of the first year wages paid up to $6,000, for a maximum income tax credit of up to $1,500. For WOTC-certified new hires working 400 hours or more, employers can claim 40% of the first year wages up to $6,000, for a maximum income tax credit of up to $2,400.
You can find a complete list of targeted groups here.
The WOTC isn’t just for for-profit businesses. It’s available to qualified tax-exempt organizations, too.
Returning Heroes Tax Credit
The Returning Heroes Tax Credit offers an incentive to employers for hiring unemployed veterans. There are a couple of facets to this credit.
Short-term Unemployment
Employers hiring veterans who have received unemployment compensation for at least four weeks are eligible to claim a tax credit of 40% of the first $6,000 of wages, up to $2,400.
Long-term Unemployment
Employers hiring veterans who have received unemployment compensation for more than six months are eligible to claim a tax credit of 40% of the first $14,000 of wages, up to $5,600.
Wounded Warriors Tax Credit
Qualifying employers can receive a maximum of $9,600 by claiming the Wounded Warriors Tax Credit.
Veterans With Service-Connected Disabilities
A veteran must be hired within one year of being discharged from the military in order for an employer to be eligible for this tax credit. The credit is 40% of the first $12,000, with a maximum credit of $4,800.
Long-Term Unemployed Veterans With Service-Connected Disabilities
Employers that hire veterans with service-related disabilities who have received unemployment compensation for more than six months may be eligible for up to $9,600 per veteran. This is a credit of 40% of the first $24,000 of wages. For tax-exempt organizations, the maximum credit is $6,240 per veteran.
How to Certify That Your Employee Is a Veteran
First things first. Before claiming a credit, employers must prove that their employee is a veteran. To do that, employers simply file Form 8850, Pre-Screening and Certification Request for the Work Opportunity Credit, with their state workforce agency within 28 days of the eligible employee beginning work.
Here are a few resources for finding your state workforce agency:
- Maryland Department of Labor, Licensing & Regulation
- Virginia Employment Commission
- DC Department of Employment Services
- Directory of all state workforce agencies
How Your Organization Can Claim the Credits
Businesses should file IRS Form 5884, Work Opportunity Credit, after claiming the credit as a general business credit on Form 3800, General Business Credit.
Tax-exempt organizations should file Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. The credit will be applied against the organization’s share of Social Security tax.
Bonus: You Could be Eligible for Public Recognition for Supporting Veterans
In addition to the tax credit, your organization could be eligible for a federal award recognition for its support of veteran careers. Learn more about the HIRE Vets Medallion Award to see if you qualify.
Need Help?
Contact us online or call 800.899.4623 for help.
