IRS issues guidance on expanded Work Opportunity credit
The IRS released guidance and forms that employers can use to claim a tax credit for hiring veterans. The guidance explains the expanded Work Opportunity credit, which was created as part of last year’s VOW to Hire Heroes Act. The IRS also announced that employers will have more time to file the required certification form for employees hired on or after Nov. 22, 2011, and before May 22, 2012.
The expanded Work Opportunity credit is available to businesses that hire eligible unemployed veterans and, for the first time, also to certain tax-exempt organizations.
The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations. The amount of the credit depends on a number of factors, including:
• The length of the veteran’s unemployment before hire,
• Hours a veteran works, and
• The amount of first-year wages paid.
Employers that hire veterans with service-related disabilities may be eligible for the maximum credit.
Normally, an eligible employer must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But according to the new IRS guidance, employers have until June 19, 2012, to complete and file this newly revised form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.
In an effort to streamline the certification requirements, the IRS clarified and expanded on 2002 guidance to facilitate employers’ use of electronic signatures when gathering Form 8850 for transmission to state workforce agencies.
The guidance confirms that employers can transmit Form 8850 electronically, and it also allows employers to transmit Form 8850 via fax, subject to the ability of the state workforce agencies to accept submissions in those formats. (Because this is new guidance, many states may not yet be ready to accept electronic or faxed submissions.) The IRS expects the Department of Labor to issue further guidance to the state workforce agencies providing further clarification.
To comply with the requirements of IRS Circular 230, we must inform you that the information discussed above is not intended or written to be used, and cannot be used by the recipient or any other taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or to promote, market or recommend to another party any transaction, entity, investment plan, arrangement or other matter.