Out of $447 billion in stimulus proposals, Congress has come together and passed two small impact items with cost offsets that will result in approximately $2 billion in savings. The veteran bill will also provide a tax credit for employing Veterans and repeals a withholding requirement for government contracts. In exchange, fees on government mortgages for vets will not decrease as planned, and non-taxable Social Security benefits will be included as income in determining whether someone is eligible for Medicaid or health insurance subsidies.
The tax credit for hiring veterans would amount to $5,600 for Veterans unemployed more than 6 months and $9,600 for disabled vets. It has not been determined at this point how the credit will be manifested, but it will most likely show up as a deduction on quarterly payroll tax forms (ex. Form 941) as such credits have been treated in the past. The bill also expands training and education programs for veterans.
The withholding provision let Federal and State governments withhold 3% of payments on government contracts starting in 2013 to apply to the contractor’s tax bill for that year. Congress decided that such a requirement would prevent job growth by reducing cash inflows to contractors who perform government contracts. Repealing this withholding provision is estimated to cost $11 billion in lost revenues.
If your business is considering hiring a Veteran, please contact our office and we would be glad to assist with the tax savings calculations from the newly passed veteran bill.