Understanding the Federal WOTC

How Hiring Veterans Can Increase Your Bottom Line

In addition to the strong work ethic and expertise that Veterans bring to an organization, employing  them can also save your company money and increase your bottom line. The federal government recognizes the challenge in hiring certain target groups, including Veterans, and has designed a program that rewards companies who hire individuals in these target groups.

Known as the Federal Worker Opportunity Tax Credit (WOTC), these benefits and savings are provided to organizations in the form of tax credits. The WOTC, which has been reauthorized and renewed through December 21, 2019, provides for-profit and qualified tax-exempt (nonprofit) employers an opportunity to claim a tax credit of up to 40% of the target group employee’s first year’s wages, with a maximum amount of $9,600. There is no limit or cap to the number of qualified candidates an organization may hire to receive this tax credit.

In order to utilize the WOTC, the Veteran you are planning to employ must meet certain criteria. He or she must have served on active duty (not including training) for more than 180 days, or have been discharged/released from active duty for a service-connected disability.  Additionally, the Veteran must not have had been assigned a period of active duty (not including training) of a period of more than 90 days within the 60 days prior to the hiring date.  In other words, the Veteran must have served in an active duty capacity for at least 6 months, and this active duty must not have occurred within the 2 months before hire.

Veterans that meet the above criteria can then be considered for eligibility under the WOTC program.  Qualifying Veterans must meet at least one of the following three requirements.

  1. A Veteran who is a member of a family that received Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date;
  2. A disabled Veteran entitled to compensation for a service-connected disability, who has been:
    1. Hired within 1 year of discharge or release from active duty, OR
    2. Unemployed for at least 6 months in the year ending on the hiring date; or
  3. A Veteran who has been unemployed for:
    1. At least 4 weeks in the year ending on the hiring date; OR
    2. At least 6 months in the year ending on the hiring date.

The tax credit formula is determined based on which of the qualification requirements the Veteran meets, the type of organization hiring the Veteran (for profit or non-profit), as well as the expected paid wages of the Veteran.

Eligibility for the WOTC is not dependent on how long ago the Veteran left service, but is instead based on meeting the stated criteria for the credit. In addition, the employee must also work at least 120 hours during the first year of employment in order to receive the tax credit.

Upon determination that a Veteran applicant meets the criteria for the WOTC, additional paperwork and data submissions must then be made by the employer.  Employer driven actions include:

  1. Completing IRS Form 8850 the day the job offer is made.
  2. Completing the ETA Form 9061 to certify employ has met the criteria for belonging to a WOTC target group.
  3. Submitting the IRS and ETA forms to your State Workforce Agency within 28 calendar days of the employee’s start date.
  4. Filing for the tax credit with the IRS once notice is received from your State Workforce Agency that the employee meets the criteria for a WOTC target group.

Applying for the WOTC is simple and can save your company money. Additional information on the program, including information on the credits available to the employer, can be found here.  A detailed breakdown of the program with links to all forms is also available to AVFE Members in the Resource Library section of the AVFE website.

If you would like to learn more about the program and its benefits, contact us today at 888-571-2833.