Wednesday, January 9, 2013

Veteran Tax Credits Extended


On January 1, 2013, Congress passed a bill that extended the Returning Heroes and Wounded Warrior Tax Credits through December 31, 2013. The Returning Heroes Tax Credit provides incentives of up to $5,600 for hiring unemployed veterans, and the Wounded Warriors Tax Credit doubles the existing Work Opportunity Tax Credit for long-term unemployed veterans with service-connected disabilities, to up to $9,600. 

There is no longer a time limit on when the veteran left the service. Previously, veterans had to be within five years of their separation. Additionally, there is no limit to the number of qualified veterans for whom you can claim this credit.

Who is an eligible veteran?

Returning Heroes Tax Credit
  • Short-term Unemployed: A new credit of 40% of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for at least 4 weeks.
  • Long-term Unemployed: A new credit of 40% of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for longer than 6 months.
Wounded Warrior Tax Credit
  • Veterans with Services-Connected Disabilities: Maintains the existing Work Opportunity Tax Credit for veterans with service-connected disabilities hired within one year of being discharged from the military. The credit is 40% of the first $12,000 of wages (up to $4,800).
  • Long-Term Unemployed Veterans with Services-Connected Disabilities: A new credit of 40% of the first $24,000 of wages (up to $9,600) for firms that hire veterans with service-connected disabilities who have been in receipt of unemployment insurance or compensation for longer than 6 months.
What should you do to file for these credits?

You must submit Form 8850Pre-Screening Notice and Certification Request for the Work Opportunity Credit and Form 9061, Individual Characteristics Form (ICF) Work Opportunity Tax Credit, to the WOTC Coordinator within your State Workforce Agency (do not mail to the IRS) within 28 days from when the veteran begins work. 

Businesses should claim these credits on their income tax returns. Currently, the IRS allows companies to carry these incentives back one year or forward 20 years. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.

PLEASE NOTE: Hire a Hero, Hire a Vet, its affiliates and its employees are not in the business of providing tax or legal advice to any taxpayer. This content is for general information purposes only, and is not intended or written to be used without the advice of the taxpayer’s independent tax advisor.

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