Hiring veterans can give physician practices tax advantages

There is a lack of awareness about a $9,600 credit for bringing on an unemployed vet.

By — Posted Feb. 28, 2012

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Many veterans work in the health sector, including medical practices, and a 2011 law makes additional tax credits available from the Internal Revenue Service for hiring them.

"Practices need to know that there are credits out there," said Marc H. Lion, a certified public accountant in Syosset, N.Y., who works primarily with medical practices.

Experts working with medical practices on financial matters say the biggest challenge is a lack of awareness that as much as $9,600 is available for hiring an unemployed veteran. The size of the credit is affected by the length of time a veteran has been unemployed and whether he or she has a service-related disability.

"These credits often fall through the cracks," Lion said.

The tax credit comes from President Obama's signing of the VOW to Hire Heroes Act of 2011, which addresses unemployment rates that are higher among veterans than the general population. This law expanded the Work Opportunity Tax Credit program that was launched in 2009 to help stimulate the flagging economy.

To claim the tax credit, a medical practice would have to hire, between Nov. 22, 2011, and May 22, a veteran who has been unemployed for at least four weeks during the past year.

The practice would then have to file form 8850 with the work force agency in its state by June 19 (link). A list of the state work force agencies can be found online (link).

The practice would then fill out form 5884 (link). With this form, a doctor could calculate the credit and claim the amount, along with other general business credits, on form 3800 (link). Both forms are filed with the IRS.

Credits can be taken for the tax year in which the veteran was hired or in the quarter in which he or she was employed, depending on how a practice files taxes.

All employers, including S-corporations and partnerships, are eligible. Tax-exempt organizations may be able to claim some of the Social Security taxes paid on the employee's wages. The credit may be claimed for any new employee who was part of the military during the Iraq and Afghanistan wars as well as previous wars elsewhere.

The annual report on employment of veterans, issued by the Bureau of Labor Statistics on March 22, 2011, said 11.5% of people who had served in the military since September 2001 were unemployed, compared with 9.4% unemployment for nonveterans. The jobless rate for a veteran of any war was 8.7%.

Encouraging more hiring of veterans in the private sector is considered key, because many work in the government sector after leaving the military. Government work, however, has been hard hit by the recession, even as other industries have started hiring again.

Of veterans who were employed, 21.9% work for federal, state or local government agencies and 8.3% work in education and health services.

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