President Obama Signs Act Eliminating Three Percent Withholding Requirement and Enhancing Incentives for Hiring Veterans
On November 21, 2011, President Obama signed the Three Percent Withholding and Job Creation Act (Act) into law. The law repeals a requirement that 3 percent of payments be withheld by federal or state governments to any person for services or property. The requirement, which was scheduled to go into effect in 2012, has now been stricken from the tax code. The law also creates new incentives and bolsters existing credits for businesses hiring certain qualifying veterans.
The Act establishes the Returning Heroes and Wounded Warrior tax credits. These credits are available for businesses which hire qualifying veterans who begin work after November 21, 2011.
The Returning Heroes tax credit provides a credit to businesses for hiring unemployed veterans. Short-term unemployed veteran hires (unemployed for at least four weeks) can generate credits up to $2400 for each new hire, while long-term unemployed veteran hires (unemployed longer than six months) can generate credits up to $5600 for each qualifying new employee.
The Wounded Warrior credit extends the existing credit of up to $4800 for each new hire of a qualifying veteran with service-connected disabilities and establishes a new credit of up to $9600 per new hire for long-term unemployed veterans with service-related disabilities.
Both the Returning Heroes and Wounded Warrior credits are Work Opportunity Tax Credits (WOTC). WOTC credits provide incentive for businesses to hire candidates from specific target groups including veterans, food stamp recipients, ex-felons, vocational rehabilitation referrals, and other specifically identified groups. The WOTC is set to expire at the end of 2011 for many target groups. Many expect the credits to be renewed.
Call us today at 513-483-6699 to learn more about how these changes may affect your business.