Tax-exempt organizations are eligible for the first time to claim an expanded Work Opportunity Tax Credit (WOTC) under the recently updated VOW to Hire Heroes Act of 2011. The Act, enacted November 21, 2011, now enables employers as well as qualified tax-exempt organizations to claim the tax credit for hiring eligible veterans who begin work on or after November 22, 2011 and before January 1, 2013.
According to the IRS, a qualified tax-exempt organization is "an organization described in section 501(c) and exempt from taxation under section 501(a)." In order to claim the credit, organizations must obtain certification that the individual hired is a member of the targeted group by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. Under normal circumstances, an eligible employer must file Form 8850 within 28 days of hire. However, a special rule included in IRS Notice 2012-13 gives employers until June 19, 2012 to file the Form for veterans hired on or after November 22, 2011 and before May 22, 2012. Employers who hire veterans after May 22, 2012 must abide by the 28-day rule.
Once the proper certification has been obtained, employers must then file Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, to claim the credit against the employer social security tax.
The amount of tax credit an organization can receive depends on a variety of factors that include the length of the veteran's unemployment prior to hire, the number of hours worked, and the amount of first-year wages. A qualified tax-exempt organization can earn up to $6,420 in credit, although the amount of the credit may not exceed the organization's employer social security tax for the period for which the credit is claimed.
For more information on the Work Opportunity Tax Credit, visit www.irs.gov.