IRS Releases Forms and Guidance for Claiming Expanded Veterans Tax Credit

The Internal Revenue Service has released guidance and forms that can be used to claim a recently expanded tax credit for employers who hire veterans, with newly streamlined certification requirements.

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 IRS said Thursday. The VOW to Hire Heroes Act of 2011, enacted Nov. 21, 2011, provides an expanded Work Opportunity Tax Credit to businesses that hire eligible unemployed veterans and for the first time also makes the credit available to certain tax-exempt organizations (see Obama Signs Veterans Hiring Tax Credit Law).

The credit can be up to $9,600 per veteran for for-profit employers or a maximum of $6,240 for tax-exempt organizations. The amount of the credit depends on several factors, including the length of the veteran’s unemployment before hire, the hours a veteran works, and the amount of wages paid the first year. Employers who 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 guidance released by the IRS, 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, IRS clarified and expanded its 2002 guidance to facilitate employers’ use of electronic signatures when gathering the Form 8850 for transmission to state workforce agencies. The guidance confirms that employers can transmit the Form 8850 electronically, and also allows employers to transmit the Form 8850 via fax, subject to the ability of the state workforce agencies to accept submissions in those formats. 

The IRS expects the Department of Labor to issue further guidance to the state workforce agencies providing further clarification.

Notice 2012-13, posted Thursday on IRS.gov, and the instructions for Form 8850, provide further details.
Businesses claim the credit on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.

This credit is also available to certain tax-exempt organizations by filing Form 5884-C.  The guidance released today also provides instructions and a new set of forms for tax-exempt organizations to claim the credit.

For more information, including how to claim the credit, visit IRS.gov.