As a small business owner, you want to take advantage of any and all tax credit opportunities!
Do you qualify for this tax credit?
Employers can take advantage of a tax credit when they hire a qualified veteran. It is called the Work Opportunity Tax Credit (WOTC), and it was extended to apply to qualified employees starting work by December 31, 2013.
See IRS Notice 2012-13 for a 16-page explanation of the tax credit and guidance on submission of the required paperwork. Here is a short list of steps to get you started …
Step 1: Get Certification
First, the IRS needs you to confirm that your employee qualifies you to take this tax credit. Of course, that means a form needs to be completed. In this case it is IRS Form 8850.
- The employee completes the first part of Form 8850 which lists all the possible situations that could qualify your employee for certification.
- You fill out the second page of the form with the employee’s dates of job offer, start date, etc.
- Send the Form 8850 to your state’s Designated Local Agency (DLAs) for processing, and they will send you the certification if everything checks out.
- Have questions? Contact your state’s workforce agency.
Step 2: Compute Your Tax Credit!
Yup. You’ll need another IRS form: Form 5884.
- After you receive the qualified employee’s certification from your state, you will complete Form 5884 and attach it to your tax return.
- Form 5884 will help you determine the amount of your tax credit.
- Tax-exempt employers will use Form 5884-C instead of Form 5884.
Step 3: Claim the WOTC
- The WOTC amount you computed using Form 5884 will be claimed as a general business credit on Form 3800 which is filed with your income tax return.
Please Note: Forms 5884/5884-C and 3800 go with the income tax return; not employment tax return.
Have questions? Consult your tax professional for answers.