Coronado-based R3 Strategic Support Group, a 19-person defense contractor, bills itself as a veteran-owned small business that employs many former or retired military members. Now, the company has an incentive to keep adding veterans to its payroll: a substantial tax credit.
The Internal Revenue Service is making it easier for companies like R3 to hire veterans and score a tax credit as a result, according to new certification guidelines released Feb. 9.
With an influx of war veterans coming home to San Diego, the federal program is a win-win for out-of-work military vets and local employers.
“It’s a great opportunity for our business community to give back to vets,” said Victor Ramsauer, shareholder at San Diego-based public accounting firm LevitZacks. “They can get employed and companies can take advantage of a nice tax provision in place.”
According to the VOW to Hire Heroes Act of 2011, for-profit companies that bring on board unemployed veterans on or after Nov. 22, 2011 and before May 22, 2012 are eligible to receive up to $9,600 per veteran if they file certification paperwork within 28 days of the hiring date.
Under the newly revised provision, however, that 28-day rule is scratched and employers have until June 19, 2012 to file for certification.
“It gives a bigger window to get the paperwork in place to qualify,” Ramsauer said.
R3 expects to qualify for the tax credit on at least one veteran hire, which was made after Nov. 22.
“I think we will hire at least one, if not two more people, before [May 22],” said Neil Marshall, associate at the five-year-old service-disabled contractor, which has clients within the Department of Defense.
The latest guidelines also open the playing field for nonprofits to qualify for the credit. Certain tax-exempt groups can receive a maximum of $6,240 per veteran.
The tax credit is actual dollars in their pocket and not a deduction, noted Ramsauer, who is counseling his clients to make sure they know the tax credit is available.
“If people are thinking about hiring and a decision is on the fence, it may be a motivator for people to step forward and add some additional employees in their ranks,” he said.
This month he emailed information about the tax credit to dozens of clients, which include smaller San Diego-based defense contractors. Companies that employ veterans with service-related disabilities may qualify for the maximum credit.
“The government wants to put people to work, first off,” said Bruce Strumlauf, shareholder and director of tax at LevitZacks. “That’s the whole reason for the policy. They want to create jobs for vets and to give employers, who may not have been aware of this opportunity, a second chance.”
The amount of the credit will be dictated by how long the veteran was unemployed before the hire, the amount of wages paid the first year and the hours worked.
“San Diego is primed for a lot of these guys to hit the streets,” Strumlauf said. “These hiring managers that understand the benefit of hiring a veteran may be more inclined to take a second look.”
Vets will likely need some training for private sector jobs, he notes, so that instantly gives them a disadvantage when competing with a more qualified job candidate for a position.
“This credit equalizes the playing field,” he said.