Veterans Day is a poignant reminder of the sacrifices made by our armed forces and prompts many of us to contemplate how we can support them. The Work Opportunity tax credit (WOTC) offers companies that hire veterans a tax credit, but 2017 may be the last year this benefit is available. The new tax reform bill released by the Ways and Means Committee of the U.S. House of Representatives on November 2 would eliminate the WOTC for hires after December 31, 2017, so if hiring veterans is a priority for the near future, you might consider jumping on it before year end.
The WOTC up close
You can claim the WOTC for a portion of wages paid to a new hire from a qualifying target group. Among the target groups are eligible veterans who receive benefits under the Supplemental Nutrition Assistance Program (commonly known as “food stamps”), who have a service-related disability or who have been unemployed for at least four weeks. The maximum credit depends in part on which of these factors apply:
- Food stamp recipient or short-term unemployed (at least 4 weeks but less than 6 months): $2,400
- Disabled: $4,800
- Long-term unemployed (at least 6 months): $5,600
- Disabled and long-term unemployed: $9,600
The amount of the credit also depends on the wages paid to the veteran and the number of hours the veteran worked during the first year of employment.
You aren’t subject to a limit on the number of eligible veterans you can hire. For example, if you hire 10 disabled long-term-unemployed veterans, the credit can be as much as $96,000.
Before claiming the WOTC, you generally must obtain certification from a “designated local agency” (DLA) that the hired individual is indeed a target group member. You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to the DLA no later than the 28th day after the individual begins work for you.
Also be aware that veterans aren’t the only target groups from which you can hire and claim the WOTC. But in many cases hiring a veteran will provided the biggest credit. Plus, research assembled by the Institute for Veterans and Military Families at Syracuse University suggests that the skills and traits of people with a successful military employment track record make for particularly good civilian employees.
It’s still uncertain whether the WOTC will be repealed. The House bill likely will be revised as lawmakers negotiate on tax reform, and it’s also possible Congress will be unable to pass tax legislation this year.
Even though the WOTC is scheduled to be available through 2019 under current law, if you’re looking to hire this year, hiring veterans is worth considering for many reasons. If you have questions about the WOTC or want help with other year-end tax planning strategies, especially in light of possible tax law changes, JLK Rosenberger can help. For more information, call us at 949-860-9902 or click here to contact us.