An Update on Tax Credits for Hiring Military Veterans

Back in December I posted a blog on how hiring military veterans can save your company money through the use of a tax credit called the Work Opportunity Tax Credit (WOTC). This credit is available via IRS Form 5884 to organizations that employ certain categories of veterans.

Thanks to The American Recovery and Reinvestment Act of 2009 (provision mentioned in Subtitle C – Tax Incentives for Business, Part III – Incentives For New Jobs on page 223 of the act –whew!) there is a new veteran category eligible for the WOTC. For a limited duration (January 1, 2009 through December 31, 2010) companies can take a maximum tax credit of $2,400 per veteran for any veteran (not just a service-disabled veteran) who was:

• Discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date, AND
• In receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1- year period ending on the hiring date.

This new veteran category of WOTC is retroactive to apply to individuals who began work for an employer after December 31, 2008.

So, how much paperwork is involved in order to claim the tax credit? Not much, so it is really a shame more employers don’t make the effort to do this. Depending on how you found the veteran applicant there are a total of two forms that require completion in order to attain certification.

If you found the veteran through your state workforce agency (SWA), you will need to complete the employer’s portion of the:

1. Conditional Certification, Work Opportunity Tax Credit, ETA Form 9062, and the
2. Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit, Form 8850

If you found the veteran on a commercial job board or at a military job fair, or if he or she applied directly to your company, you will need to complete the employer’s portion of the:

1. Individual Characteristics Form (ICF) Work Opportunity Tax Credit Form 9061, and the
2. Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit, Form 8850

If you found the veteran through your SWA, his or her veterans’ status may already be conditionally certified by the SWA. Either the SWA or the applicant should provide you with a copy of the Conditional Certification, Work Opportunity Tax Credit, ETA Form 9062. All you need to do is complete the employer portion of the form, which asks for:

• Your company name,
• The position/job title the applicant is being hired to fill,
• The employment start date, and
• The starting wage.

Both the Form 9062 and the Form 8850 must be sent back to the SWA no later than 28 days after the applicant starts work. If all information can be verified, you will receive a WOTC Employer Certification Form for that veteran.

If you found the veteran on a commercial job board or at a military job fair, or if he or she applied directly to your company, you can still request certification of his or her status by completing the Individual Characteristics Form (ICF) Work Opportunity Tax Credit Form 9061, collecting a copy of the required documentation (listed on the form) from the veteran, and providing it and the Form 8850 to your SWA for verification.

With the Form 9061, you must first determine if the applicant is willing to provide the required information. Prospective employees are not required to provide information of this sort to an employer – their participation must be voluntary. A simple way to do this is to make this a routine document that is presented to all applicants – attach a cover sheet indicating that status disclosure is completely voluntary and does not adversely affect hiring decisions.

If the applicant is willing to provide the required information, have him/her complete blocks 6-8 and 12-19 of the form. The form must be completed on or before the applicant is offered employment.

There are some military placement companies and military job boards already collecting this information as a service to the employer. If you are considering using a placement company and/or a job board as part of your military hiring strategy you should inquire if it collects this information for you.

As with the earlier situation, both the Form 9061 and the Form 8850 must be sent back to the SWA no later than 28 days after the applicant starts work. If all information can be verified, you will receive a WOTC Employer Certification Form for that veteran. Those certification forms serve as documented proof that will back up the claim you make on the IRS Form 5884 when your company files its taxes.

Note that the language on Forms 9061 and 8850 has not yet been updated to reflect the new veteran category, and it is yet undetermined whether the forms will ever be updated, given the relatively short duration this new category is in effect. I’ve spoken with a few state WOTC coordinators and their advice is to just write in the category “unemployed veteran” across the top of the form.

The WOTC can be carried back one year or forward 20 years, which is especially helpful for smaller businesses who may not have enough tax liability this year to take the full credit, but who have hired qualified veterans and are otherwise entitled to the credit.