New tax incentives for hiring veterans could mean tax savings, but in order to take advantage of these incentives, businesses need to have the know-how.
In 2011, Congress passed the “VOW to Hire Heroes Act” to help veterans get out of the unemployment line. The act offers tax credits to businesses that hire veterans and provides additional support and training to veterans who are currently unemployed. Just 10 days after Veteran’s Day that same year, President Barack Obama signed it into law.
While joblessness continues to be a problem for many Americans, lawmakers across party lines supported the act because veterans, particularly those returning from Iraq and Afghanistan, struggle to find employment even more than the civilian population. According to the U.S. Bureau of Labor Statistics’ January 2012 report, veteran joblessness hovers slightly above 9 percent for those who served in current wars, while the overall population’s unemployment rate is 8.3 percent.
Congress hopes employers will help reduce that number by taking advantage of the tax incentives. However, weeding through the bureaucracy to find those money-saving tax credits, for some businesses, may seem like more trouble than it is worth. Employers can follow a few simple steps to get the ball rolling and capitalize on the credits before the 2014 deadline.
Under the current act, a veteran qualifies if he or she has been looking for a job for more than four weeks. The tax credits then vary depending on the length of time a veteran has been unemployed and whether the veteran has a service-connected disability.
The magic number, 28, refers to the number of days an employer has to file for benefits after hiring a qualified veteran. According to the Society for Human Resource Management (SHRM), all businesses that hire a veteran must submit IRS form 8850 and either Department of Labor Employment and Training Administration form 9061 or 9062 to their local Work Opportunity Tax Credit (WOTC) coordinator in order to obtain certification for the tax credits.
For businesses spanning across states, the process can become more complicated. After filing the necessary federal forms, employers must then contact WOTC coordinators in each state where the newly hired veteran will be working. Once the employer receives the certification letter from that state they may then claim the tax credit.
The filing process is worth the effort given that it could result in thousands of dollars in tax savings. According to SHRM, companies that hire veterans can receive the following tax credits:
-- 40 percent of the first $14,000 in wages (up to $5,600) for hiring veterans who have remained unemployed for more than six months.
-- 40 percent of the first $6,000 in wages (up to $2,400) for hiring veterans who are unemployed for more than four weeks, but less than six months.
-- 40 percent of the first $24,000 in wages (up to $9,600) for veterans with service-connected disabilities who have been looking for a job for more than six months.
In addition to having a positive impact on a company’s bottom line, hiring veterans may be a wise investment. Veterans often have engrained skills that can prove very desirable over the long-term. For example, service men and women are trained to be on time, make difficult decisions, respect authority, remain drug-free and work well in a team environment. Additionally, veterans may offer specialized skills in a variety of areas such as technology, machinery, food service, facilities management, aviation and foreign language.