New Act Benefits Government Contractors, Veterans

On Nov. 21, 2011, President Obama signed the Three Percent Withholding Repeal and Job Creation Act. 

Under the new act, Congress has repealed the 3 percent withholding rule, which was set to apply to all payments to government contractors beginning Jan. 1, 2013. This controversial requirement, which would have affected payments by all levels of government -- federal, state and local -- had been delayed several times. It was originally supposed to go into effect in 2011. Both government contractors and the government agencies that would have had to implement the withholding will benefit from the repeal.

Congress extended the Work Opportunity Tax Credit through 2012 for certain veterans and added two new categories of unemployed veterans. The credit can reach as high as $9,600 and is calculated based on 40 percent of the veteran's first-year wages.

A tax-exempt employer may claim a credit against the Social Security tax that the exempt employer would otherwise have to pay on the wages of all its employees during the one-year period beginning with the day the veteran goes to work for the tax-exempt organization.

The new rules affect the employers of qualified veterans who begin work after Nov. 21, 2011, and before Jan. 1, 2013.

 
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