On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, or H.R. 4853 (there’s a mouthful!).  It provided a two year extension of many tax cuts enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

However, much to my disappointment, a tax credit that had been modified as part of The American Recovery and Reinvestment Act of 2009 (ARRA) was not extended under the new Job Creation Act.

If you are not familiar with the Work Opportunity Tax Credit (WOTC), it is a program that incentivizes employers to hire from within a number of targeted groups of persons who are challenged in finding employment (i.e., the homeless, those who have previously been incarcerated, etc.)  Employers who hire from within these targeted groups can claim a tax credit of anywhere from $2,400 – $4,800 per person hired.

WOTC includes two categories of veterans who are targeted – veterans whose families received food stamps and service-disabled veterans.  ARRA added a third, very broad veteran category, with a limited duration (January 1, 2009 through December 31, 2010).  That third category allowed companies to take a maximum tax credit of $2,400 per veteran for any 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.

With over 165,000 military members completing their service obligations each year, a significant portion of them could have been hired using that broad category of WOTC, had the employer chosen to pursue it.  Given the still-ugly employment situation we face in 2011, and the continuously increasing veteran unemployment rate, extending that third category seemed like a good way to further encourage employers to hire military.

So, while that broad category has gone away, you can still take advantage of WOTC this year to hire other categories of veterans, such as those with service-connected disabilities.  Please refer to the blog I wrote last year with detailed instructions on how to do that.

Remember that the WOTC incentive is not going to be around forever – the Job Creation Act of 2010 extended it through the end of 2011.  If you don’t make an effort to use it this year, it may not be around next year.


One Response to “An Update on claiming WOTC for Hiring Veterans”

  1. Lisa Rosser

    *STAY TUNED*

    New Senate Bill Will Expand WOTC for Veterans

    Senators Baucus and Grassley introduced Senate Bill 146 to expand the Veteran category for WOTC and simplify the certification process. A Finance Committee press release explains:

    This Veterans Employment Transition Act, or the VETs Jobs bill, would reward employers for hiring qualified veterans who have recently completed their service in the military with a tax credit of up to $2,400 per veteran. A previous version of this credit, which was part of the Work Opportunity Tax Credit, was designed to help employers hire veterans, but expired at the end of 2010. The new legislation Baucus and Grassley are introducing today would reinstate the tax credit and make it easier for veterans and small businesses to use. As a result, servicemen and women who have been recently discharged will be able to provide documentation directly from the Department of Defense without having to go through the tax credit’s current certification process.

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