Employer Tax Credits


Veteran Tax Credits

On November 21st, 2011, culminating the effort President Obama began on August 5th at Navy Yard and advanced through the American Jobs Act, the President signed The Vow to Hire Heroes Act of 2011. This law combined provisions of the veterans’ tax credits from the President’s American Jobs Act, Chairman Murray’s Hiring Heros Act, and Chairman Miller’s Veterans Opportunity to Work Act into a comprehensive package that will aggressively attack the unacceptably high rate of unemployment.

Returning Heroes Tax Credit
A new hiring tax credit that incentivizes firms to hire unemployed Veterans

  • Short-­‐term unemployed: A new credit of 40 percent of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been unemployed at least 4 weeks
  • Long-­‐term unemployed: A new credit of 40 percent of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been unemployed longer than 6 months

Wounded Warrior Tax Credit

  • Veterans with services-connected disabilities: Maintains the existing Work Opportunity Tax Credit for veterans with service-connected disabilities hired within one year of being discharged from the military. The credit is 40% of the first $12,000 of wages (up to $4,800)
  • Long-term unemployed Veterans with services-connected disabilities: A new credit of 40% of the first $24,000 of wages (up to $9,600) for firms that hire veterans with service-connected disabilities who have been in receipt of unemployment compensation for longer than 6 months. The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations

How Businesses Can Apply for these Credits

  • Complete IRS Form 8850 by the day the job offer is made
  • Complete ETA Form 9061 or complete ETA Form 9062 if the employee has been conditionally certified as belonging to a WOTC target group by a State Workforce Agency, Vocational Rehabilitation agency, or another participating agency
  • Submit the completed and signed IRS and ETA forms to your State Workforce Agency. Forms must be submitted within 28 calendar days of the employee’s start date
  • Wait for a final determination from your State Workforce Agency. The determination will indicate whether the employee is certified as meeting the eligibility for one of the WOTC target groups
  • After the target group employee is certified by the State Workforce Agency, file for the tax credit with the Internal Revenue Service

 


Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

WOTC helps targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers are able to reduce their income tax liability.

The maximum tax credit ranges from $1,200 to $9,600, depending on the employee hired.

To be considered a veteran eligible for WOTC, an individual must meet these two standards:
  • Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability; AND
  • Cannot have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.
To be eligible for WOTC, a Veteran must also be one of the following:
  • A member of a family that received Supplemental Nutrition Assistance Program benefits (food stamps) for at least 3-months during the 15-month period ending on the hiring date; OR
  • Entitled to compensation for a service-connected disability and was
  • Unemployed for at least 6 months in the year ending on the hiring date; OR
    • Unemployed for:
      • At least 4 weeks (but less than 6 months) in the year ending on the hiring date, or
      • At least 6 months in the year ending on the hiring date
Short Term Assistance for Needy Families (TANF) Recipient

An individual who is a member of a family that received TANF benefits for any 9 months during the 18-month period ending on the hiring date

Long-Term TANF Recipient

An individual who is a member of a family that meets one of the following:

  • Received TANF benefits for at least 18 consecutive months ending on the hiring date; OR
  • Stopped being eligible for TANF payments during the past 2 years because a Federal or state law limited the maximum time those payments could be made, and the individual is hired not more than 2 years after such eligibility ended; OR
  • Received TANF benefits for any 18 months after August 5, 1997, and has a hiring date that is not more than 2 years after the end of the earliest 18-month period after August 5, 1997

An individual age 18-39 years who is a member of a family that received SNAP benefits (food stamps) for:

  • The 6-month period ending on the hiring date; OR
  • At least 3 of the 5 months ending on the hiring date, in the case of a family member who ceased to be eligible for such assistance under Section 6(o) of the Food Stamp Act of 1977

An 18-39 year old who lives within one of the federally-designated Rural Renewal Counties or Empowerment Zones. For additional information on Rural Renewal Counties or Empowerment Zones, click here.

Click here to view a listing of current Empowerment Zones (EZs)

To locate Empowerment Zones, visit the EZ Locator.

An individual with a disability who completed or is completing rehabilitative services from a state certified agency, an Employment Network under the Ticket to Work program, or the U.S. Department of Veteran Affairs.

An individual who:

  • Has been convicted of a felony; AND
  • Who is hired within 1 year after the conviction or release date from prison

An individual who received Supplemental Security Income (SSI) benefits for any month that ended during the 60-day period ending on the hire date.

A 16 or 17 year old youth who:

  • Works for the employer between May 1st and September 15th; AND
  • Lives within one of the federally-designated Empowerment Zones
  • see 'Designated Community Resident' section above for 'Empowerment Zone' links

Qualifications

Some employees do not qualify the employer for the WOTC, they include:

  • Relatives and dependents of the employer, including sons, daughters, stepchildren, spouses, fathers, mothers, brothers, sisters, step-brothers or sisters, nephews, nieces, uncles, aunts, cousins, or in-laws
  • Former employees, regardless of how long it has been since he/she last worked for the employer (except for summer youth)
  • Majority owners of the business

Wage Calculations

Wages include all remuneration paid to an employee. However, to qualify, the wages must be:

  • Wages for which the employer pays Federal Unemployment Tax Act (FUTA) taxes
  • Wages actually paid by the employer, including those to on-the-job training (OJT) participants. If the OJT worker is receiving subsidized wages directly from another party, or indirectly paid through the employer, then the wages do not qualify (although the hours worked for the employer count for the minimum retention period)

 

For more detailed information on the WOTC, please visit the United States Department of Labor website.

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