MainStreet.com: Hire a Veteran, Save on Taxes - TheStreet

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The U.S. troop count in Iraq is currently 144,000, force levels in Afghanistan are hovering around 32,000, and there is no established timetable to withdrawal the troops. But there is a way to offer support upon their return, and it's a win-win for both small businesses and soldiers.

"There are federal tax credits available, and they can have a significant impact for businesses filing taxes," says Nancy Steffens, a communications director with the Connecticut Department of Labor.

Surprisingly though, few businesses take advantage of these money-saving hiring incentives.

According to Blake Christian, CPA and co-founder of the

National Tax Credit Group

, nationwide credits are claimed by only 10% of eligible businesses, despite the fact the credits are worth roughly three times more than a tax deduction.

With the federal tax rate for corporations at 35%, a $3,000 deduction translates to only a $1,050 benefit after taxes. But a $3,000 credit reaps a $3,000 reward, making a credit considerably more valuable, especially for businesses hiring multiple veterans.

In 2007, the Work Opportunity Tax Credit Program (WOTC) expanded its eligibility requirements and increased the available tax credit to businesses from $2,400 to $4,800.

Veterans who receive food stamps for at least three consecutive months in the 15 months prior to employment are eligible, as is any vet who has sought either physical or psychological rehabilitation because of a service-related injury.

Additionally, veterans living in one of 408 designated rural renewal counties in 32 states are WOTC eligible.

"The business doesn't have to be in the same rural renewal county, but can be in a metropolitan city and draw people from the rural county," says Christian. "That really liberalizes the WOTC program."

And, if an employee received welfare benefits before becoming starting work, the federal Welfare-to-Work program offers business a credit worth up to $8,500 during a two-year employment period.

The WOTC isn't the only credit available to businesses hiring veterans. Enterprise Zone Programs, which are designed to stimulate economic growth in economically depressed areas, can be found in 41 states. Military veterans within four years of service, active-duty or reserve, can qualify their employers for $37,000 in credits during a five-year period under this state-sponsored program.

The specifications vary from state to state, but it is not uncommon for a business to be able to claim 50% of the veteran employee's first year of W-2 wages, up to $12 an hour. For years two through five that the veteran is employed, the business receives a 40%, 30%, 20% and 10% credit, respectively.

"One person can qualify for multiple benefits," adds Christian. "Sometimes when you receive several, some of the credits are scaled back from one benefit because you're double-dipping." But, there are plenty of credits that don't overlap, offering employers multiple incentives to hire veterans.

For business owners interested in hiring veterans, the first step is to talk to an accountant, Christian says. And don't accept the argument that the credits might make your paperwork too much of a hassle. "It's usually one extra form in the return, and the payoff is very significant on your labor costs," Christian adds.

The paperwork consists of a one-page IRS Form 8850 and one-page ETA Form 9061. The 8850 is a prescreening document that alerts a business to an employee's eligibility for veteran credits.

"Sometimes that can be awkward asking personal questions, so we ask that employers include the 8850 in their employer packet," says Steffens. "Then veterans can just check a box indicating whether they were injured or received food stamps." The forms are available on state government Web sites or by calling your state's tax unit. The paperwork must be postmarked no later than 28 days after a veteran starts on the job.

There are several resources for business owners looking to recruit veterans. Our two favorites:

Monster.com

(MNST) - Get Report

powers its own veteran recruiting arm stocked with more than 200,000 veteran resumes.

Also, International Franchise Association's

VetFran

is for veterans looking to start a business of their own. The initiative helps qualified veterans acquire small franchise businesses.