Making the "Work Opportunity Tax Credit" Work for Employers Hiring Veterans– February 17, 2012

The IRS recently issued guidance on the work opportunity tax credit (WOTC) regarding amendments made to the credit last fall. Below is an update on how employers can take advantage of the WOTC specific to the hiring of qualifying veterans. In addition to the criteria listed below, veterans must be hired from November 22, 2011 through December 31, 2012 to qualify.

  • Veterans with a service-connected disability.This category of veterans is eligible for the highest amount of WOTCs. Employers may qualify for a tax credit of 40% of qualified wages up to $4,800 for veterans hired with a service-connected disability. For those veterans with a disability who also have been unemployed for at least six months, an employer may qualify for a tax credit of 40% of qualified wages of up to $9,600.

  • Veterans without a service-connect disability.Veterans unemployed for at least four weeks qualify employers for a tax credit of 40% of qualified wages up to $2,400. Those veterans unemployed for at least six months qualify employers for a tax credit of 40% of qualified wages up to $5,600.

  • Qualified tax-exempt organizations.Organizations such as 501(c)s that hire qualified veterans are eligible to apply for the credit, if the above qualifications have been met.

  • Transitional relief.Most employers are required to submit form 5580 to claim the WOTC; tax-exempt organizations must submit form 5884-C. All employers hiring qualifying veterans on or after November 22, 2011 and before May 22, 2012 have until June 19, 2012 to submit their form(s) to the appropriate state agency. For veterans hired after May 21, 2012, employers have 28 days to submit.

  • Verification.State workforce agencies will certify veterans as meeting the required periods of unemployment based on receipt of unemployment insurance compensation. The website below has a link to each state’s work opportunity credit coordinator.

More detailed information on the WOTC and PDFs of the required forms can be found at the U.S. Department of Labor website at http://www.doleta.gov/business/incentives/opptax/employer.cfm. Or contact a member of your service team with additional questions.

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.