Fifty-Five tax breaks are set to expire as 2013 comes to a close, including an incentive for veteran hiring.
Veterans of war and ex-convicts have very little in common. The former have risked their lives for the good of the people; the latter have compromised the good of the people by breaking the law.
But they're alike in at least one regard. Both groups of people left civilian life for an extended period of time, only to return to a scary world where jobs are very difficult to find. That's why the Work Opportunity Tax Credit (WOTC) exists, to provide thousands of dollars in incentives to companies who hire not only veterans or ex-convicts, but also welfare recipients, people on food stamps and others with a disadvantage in the job market.
Now that 2013's over, though, say goodbye to this tax incentive program— for now, at least.
Congress left Washington this month without passing an extension for a series of 55 tax breaks -- including the WOTC – leaving veterans advocates in Western New York practically begging federal lawmakers to revisit the issue.
"This is essential," said Marlene Roll, the Junior Vice Commander of the Veterans of Foreign Wars in Buffalo. "A company might have been on the verge of being able to hire a veteran, but not quite… and if they have that tax credit, maybe they have that little extra cash flow."
There's still a chance Congress could retroactively extend these tax breaks for companies across the country. In fact, according to tax incentives expert Vaughn Hromiko, who owns California-based NorCal Tax Credit Advisors, lawmakers have consistently let breaks expire before passing extensions months later. Hromiko estimates that this situation has occurred eight or nine times since 1996 alone. At the end of 2011, for example, Congress waited 12 months before finally passing an extension.
"We're counting on it being renewed," Hromiko said. "[But] it could be months, or even 2015 before we actually see it passed. That wouldn't be unusual."
According to the Department of Labor, the WOTC program nets more than $1 billion for employers on an annual basis by offering up to $9,600 for hiring employees who fit a certain criteria.
Tax credits are a difficult sell in Washington due to the current economic climate and backlash against adding to the federal deficit. At least one Iowa Democrat has pushed for an extension, however, and Hromiko said he believes a recent bill introduced for January could "get some attention." Still, without a promise of an extension, companies may choose to shun veterans and other workers who may or may not eventually garner them a tax break.
"If you have employers that are counting on this, they frequently will go out and recruit from people who are in these categories. For it to be put in limbo, it really creates uncertainty in the hiring process," Hromiko said. "There are some companies who put off engaging the program, because they're not sure if it's actually going to start up again."
The tax credit hiatus won't prevent companies from submitting paperwork for the program in case it restarts, although Hromiko said the large volume of requests may pile up due to the delay.
In addition to the Work Opportunity Tax Credit, the 54 other breaks expiring at the end of 2013 affect a lot of different industries and individuals. For example, one of the tax breaks allowed reimbursement for teachers who paid for school supplies out of their own pockets. Deductions for local and state taxes and college tuition will also end. Michael Curatolo, a financial advisor for Georgetown Capital, said the tax breaks are complicated and mostly affect businesses.
"You're taking away a benefit. You're taking away a deduction that you had, and now you don't have that ability to save money," Curatolo said. "But really, you should be doing this come April, when you're doing your 2013 tax return. That's the time to be planning for 2014, making sure you're getting as many deductions as possible."
But Curatolo added that it's important to pay attention to the decisions made at the federal level.
"Washington is constantly changing things, and they're constantly extending things," Curatolo said. "So what may not be here today… may be extended anyway."
That's what Roll and other veterans advocates like to hear.
"I don't see our lawmakers going backward on this. I'm hoping they prove me right on that, and when they get back, they re-instate this," Roll said. "Quickly."