Roth & Company, PC Tax Update Blog

Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

President signs into law new tax breaks for hiring (and replacing) veterans

November 22, 2011

President Obama yesterday signed into law increased tax credits for hiring certain veterans. The credits are part of the Work Opportunity Credit, which requires that employers certify through state jobs agencies that employees qualify for the credits.

The credit rules, effective for veterans hired today:

- A maximum $4,800 credit (40% of the first $12,000 in qualifying wages) for veterans with a service-related disability hired within 12 months of discharge (no change from prior law).

- A maximum credit of $9,600 (40% of the first $24,000 in qualifying wages) for veterans with a service-related disability who have been unemployed for at least six months of the prior 12 months.

- A maximum credit of $5,600 (40% of the first $14,000 in qualifying wages) for non-disabled veterans who have been out of work for at least six months out of the prior 12 months.

- A maximum credit of $2,400 (40% of the first $6,000 in qualifying wages) for veterans who have been unemployed at least four weeks, but less than six months, in the past year.

Employers will have to either have the employee certified before hiring, or complete a "pre-screening notice (Form 8850) by the date of the employment offer and submit it to the state agency within 28 days after the employee's start date.

While the rest of the WOTC expires at the end of this year (unless it gets extended again), the veterans credits apply for hires through 2012.

Are these credits good tax policy? No. Their inherent complexity and paperwork make it likely that many taxpayers will fail to claim the credit; it rewards having a good human resources function as much as it awards hiring veterans. I doubt that veterans need special help finding work -- their successful service alone is often a good signal to prospective employees. It seems insulting to lump veterans in the same code section as "qualified ex-felons." And Opportunistic taxpayers with good HR departments can even fire existing veterans and use the credits to hire their replacements.

Still, we go to filing season with the tax law we have, not the one we would wish for, so make sure your HR people don't leave these tax credits on the table.

UPDATE, 11/23: More from Roger McEowen.

Tags: ......

      Bookmark: del.icio.usDiggreddit

Email: jkristan@rothcpa.com  •  Phone: (515) 244-0266
All content © Roth & Company, P.C.  •  Powered by Movable Type  •  Site by Sekimori Design