The 3% Withholding Repeal and Job Creation Act (HR 674) was recently signed into law by President Barack Obama. The new law repeals the 3% withholding on certain payments made by the federal, state, and local governments. It also established the Returning Heroes Work Opportunity Tax Credit (Returning Heroes WOTC) and the Wounded Warriors Work Opportunity Tax Credit (Wounded Warriors WOTC), which provide credits to employers who hire qualified veterans.
Returning Heroes WOTC
The Returning Heroes WOTC has two types of incentive. The first incentive, for veterans who have been unemployed for at least four weeks, is equal to forty percent of the first $6,000 wages or up to $2,400. The second incentive, for veterans who have been unemployed for at least six months, is equal to 40% of the first $14,000 wages or up to $5,600.
Wounded Warriors WOTC
The Wounded Warriors WOTC also has two types of incentives. The first incentive is an extension of the current existing Work Opportunity Tax Credit (WOTC) for veterans with a service-connected disability. The credit, which was set to expire on December 31, 2011, is now extended to December 31, 2012. This credit is worth up to $4,800. It also adds a new incentive for veterans with a service-connected who have been unemployed for at least six months. It is equal to 40% of the first $24,000 wages or up to $9,600.
Tax-Exempt Entities May Receive Payroll Tax Credit
The new law also provides incentives to tax-exempt organizations for hiring veterans “for services in furtherance of the activities related to the purpose or function constituting the basis of the organization’s exemption.” The credit for tax-exempt entities is a payroll tax credit rather than an income tax credit and is only available for 26% of wages, not 40%.
Contact Vision Payroll for Tax Credit Information
Contact Vision Payroll for more information on the tax credits available for hiring Returning Heroes and Wounded Warriors.