On November 21, 2011 President Obama officially signed into law Legislation, H.R. 674. This created the extension of the WOTC better known as the Work Opportunity Tax Credits for qualified veterans. This law authorizes tax credits for employers that choose to hire certain groups of veterans.
The returning heroes and wounded warriors were already a part of the previous legislation that was set to end come December 2011, but with this new law there are new categories of veterans that will be covered by the credit, which includes veterans who have only been unemployed as short of a period as four weeks. Wages will increase both for employers and for those that currently fall under the previous law. These credits are taken just as a general business tax credit would be used.
Employers may qualify for a credit that is up to 40 percent of the qualified wages; qualified wages maximums vary depending on the category in which the veteran falls. For instance, a disabled veteran who has been unemployed for at least 6 months in the previous year prior to a hire date has a wage maximum of $24,000 which makes the maximum credit $9,600. But a veteran without a service connected to disability who has also been unemployed at least 6 months in the year prior to hire has a wage maximum of only $14,000 which the maximum reaching $5,600. Even more incredibly an employer that has a qualified veteran that has worked at least 120 hours may be able to receive a reduced credit of 25 percent total qualified wages.
How to Obtain More Information
The credit is first figured on Form 5884 and then becomes a part of the general business credit which can be claimed on Form 3800. Certain text-exempt organizations are also able to receive this credit by filing Form 5884-C.
For eligible veterans hired on or after November 21, 2011 and before May 22, 2012: Employers have until June 19, 2012 to file the newly revised Form 8850 with the state workforce agency.
For eligible veterans hired on or after May 22, 2012: Employers will need to file Form 8850 within 28 days after the employee begins work.
For more information on how to claim the extended veterans tax credit, please visit IRS.gov.