Nonprofits: Generate Cash Flow When You Hire WOTC-Qualified Veterans
Nonprofit organizations have an opportunity to jumpstart their cash flow with the help of the Work Opportunity Tax Credit (WOTC). For each qualified veteran hired, a tax exempt organization can generate a credit of up to $6,240 in its first year of employment.
Right now, nonprofit employers have until September 28, 2016 to claim the credit for qualified veterans hired since January 1, 2015. However this “catch up” period is coming to a close very soon:
As of September 1, 2016, only current and future hires will be considered eligible for the credit.
How it works
Tax exempt employers who hire veterans are eligible for refunds of payments made on Form 941. Any organization that is tax exempt under 501(c) is eligible for the credit.
Identifying eligible veteran hires
To be considered a veteran under WOTC, the individual has to meet two requirements:
- The individual must have served on active duty in the U.S. Armed Forces for more than 180 days.
- Time for training does not count towards “active duty.”
- An individual does not have to serve the required 180 days consecutively.
- If a veteran with less than 180 days of active duty is discharged because of a service-connected disability, then he or she will be treated as having served 180 days.
- The individual must not have finished a period of active duty (not including training) of more than 90 days within 60 days of being hired. (The idea behind the law is to give preference to veterans who have been unable to find employment.)
A veteran will also qualify if meeting any of the following criteria:
- A member of a family that received food stamp assistance for at least a three month period during the year prior to the hiring date
- Unemployed for a period totaling at least four weeks but less than six months in the year prior to the hiring date
- Unemployed for a period of at least six months in the one-year period ending on the hiring date
- Entitled to compensation for a service-connected disability and hired within a year after being discharged from active duty
- Entitled to compensation for a service-connected disability and unemployed for a period totaling at least six months in the year prior to the hiring date
These periods of unemployment can be cumulative and do not have to be consecutive weeks.
How we can help
Because the credit has been extended through 2019, employers now have several years of stability not previously experienced with the law. This presents an opportunity for employers to reevaluate their ability to claim the credit both retroactively and going forward. We can help you embed WOTC screening into the employment onboarding process and assist you in determining whether the credit applies to your organizational situation.