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American Payroll Association (APA) Basic Guide to Payroll, 2013 Edition
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CCH® PAYROLL — 4/10/12

Expanded WOTC is available for hiring veterans

The Vow to Hire Heroes Act of 2011 (P.L. 112-56) made changes to the Work Opportunity Tax Credit (WOTC). The Act added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer’s share of social security tax. The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work on or after November 22, 2011, and before January 1, 2013. The credit can be as high as $9,600 per qualified veteran for for-profit employers or up to $6,240 for qualified tax-exempt organizations, but the amount of the credit will also depend on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. The amount of the credit for qualified tax-exempt organizations may not exceed the organization’s employer social security tax. The process for certifying the veterans for the WOTC is the same for qualified tax-exempt organizations as it is for any other employer. See Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and its instructions.

The process for for-profit employers to claim the WOTC for qualified veterans remains the same as any other qualifying category. For-profit employers calculate the credit on Form 5884, Work Opportunity Credit, and then reports the amount calculated on to Form 3800, as a General Business Credit against their income tax.

Qualified tax-exempt organizations, organizations described in Code Sec. 501(c) and exempt from taxation under Code Sec. 501(a), may claim the credit for qualified veterans who begin work on or after November 22, 2011, and before January 1, 2013. They claim the credit against the employer social security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, rather than on their employment tax returns. The IRS will be providing additional information on how qualified tax-exempt organizations should claim the credit. More information will be posted on IRS.gov as it becomes available. (SSA/IRS Reporter, Spring 2012.)

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