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The Work Opportunity Tax Credit (WOTC) and Senate Bill 146
The WOTC is a federal income tax credit program administered by the U.S. Department of Labor. It provides businesses with an incentive to hire and retain individuals from groups that have a particularly high unemployment rate or other special employment needs. The program reduces the federal tax liability and helps job-seekers to move toward economic self-sufficiency. Generally, businesses that hire from selected groups of qualified job-seekers can generate direct federal tax savings ranging from $1,200 to $9,000 per qualified employee, which include summer youth hires, certain adult hires, such as residents of federal empowerment zones or renewal communities (among others), disabled veterans, and long-term Temporary Assistance for Needy Families (TANF) recipients. On January 26, 2011, Senate Finance Committee Chair Max Baucus and Ranking Member Chuck Grassley introduced Senate Bill 146, the “Veterans Employment Transition Act” (“VETs”) This job bill will reward employers who hire veterans who had recently completed their service in the military with a tax credit up to $2,400 per veteran. As discussed above, the WOTC had a similar targeted group for businesses that hired disabled veterans. However, that category expired December 31, 2010. Unlike the former disabled veterans targeted group, the VETs job bill will allow servicemen and women to provide documentation directly from the Department of Defense to the potential employer without having to obtain WOTC certification. An eligible veteran under the VETs job bill is an individual who has left active duty in the past five years with 180 days of qualified active duty, including individuals who were on active duty in their respective state’s National Guard, or had a service-connected disability. In general, employers seeking to benefit from the WOTC program must complete IRS Form 8850 Pre-Screening Notice and Certification Request of the WOTC, as well as ETA Form 9061 Individual Characteristics Form, and mail the forms to the respective states’ State Workforce Agency’s (“SWA”) WOTC Coordinator, no later than 28 days from the new hire employment start date. However, under S. 146, the 28 day requirement is waived. Under the VETs bill, job-seekers seeking employment under the expanded veterans targeted group may provide Department of Defense documentation directly to the prospective employer, and as such, no additional certification will be required. Please contact our tax professionals to discuss how the new change to the WOTC program can benefit your business. As always, please call if you would like to discuss any of these items further.
Your Tax Partners, Mark G. Cook, Partner Steven J. Cupingood, Partner John A. Eckweiler, Partner Dan B. Faulk, Partner Andrew L. Gantman, Partner Richard A. Linder, Partner David Neighbors, Partner Todd Northrup, Partner Javier Ramirez, Partner Thomas E. Wendler, Partner Jon Widdowson, Partner Michael Wu, Partner Don Leve, Partner
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