The Research and Development (R&D) Tax Credit is a valuable tax incentive program that rewards businesses for investing in innovation. The credit is designed to encourage businesses to conduct research and development activities that will lead to new or improved products, processes, or software.
Here are some key things business owners should know about the R&D Tax Credit:
What activities qualify for the credit?
The R&D Tax Credit is available to businesses of all sizes and across all industries. Eligible activities can include developing new products, processes, or software, improving existing products, processes, or software, and conducting research to resolve technical uncertainties. The IRS provides a comprehensive list of eligible activities on its website.
Who is eligible for the credit?
Any business that incurs expenses related to eligible R&D activities may be eligible for the credit. This includes businesses of all sizes and structures, including corporations, partnerships, and sole proprietorships.
How much is the credit worth?
The credit is worth up to 20% of qualified research expenses (QREs) for the current year over a base amount. The base amount is calculated based on the business’s historical R&D spending. The credit can be applied against income tax liabilities or, for qualified small businesses, against payroll taxes.
How can businesses claim the credit?
Businesses must first conduct eligible research and development activities and maintain detailed documentation to support their claim. This includes identifying qualified research activities and expenses, and calculating the credit amount. To claim the credit, businesses must file Form 6765 with their tax return. The form requires detailed information on the business’s eligible R&D expenses and activities.
We can Help!
By partnering with Tax Credit Group, businesses can receive expert guidance and support throughout the R&D tax credit process, ensuring that they are maximizing their eligible tax credits and minimizing the risk of errors. Call us today to learn more about how our team can help your business take full advantage of this valuable incentive program.
The Work Opportunity Tax Credit (WOTC) is a valuable incentive program to potentially reduce your tax liability while making a positive impact in your community. As a small business owner, you have the opportunity to uncover the immense benefits and potential that tax credits can have on your business. In this article, we’ll break down the basics of the WOTC and explain how it can benefit both your business and the individuals you employ.
Determine Employee Eligibility
The first step in claiming the WOTC is to determine whether an employee falls into one of the targeted groups specified by the IRS. These groups include qualified IV-A recipients, qualified veterans, qualified ex-felons, designated community residents, vocational rehabilitation referrals, summer youth employees, SNAP recipients, Supplemental Security Income recipients, long-term family assistance recipients, and qualified long-term unemployment recipients.
Apply for Certification
To certify that an employee qualifies for the WOTC, you need to submit these forms to the state workforce agency (SWA) in your state within 28 calendar days from the employee’s start date.
Have the job applicant complete Form 8850 before or on the day of making a job offer.
Complete the remaining sections of Form 8850 at the time of the job offer.
Fill out the conditional certification Form 9061 (or request Form 9062 if the applicant already has it).
Check to see if any additional forms are required for the applicant’s specific targeted group.
The SWA will provide you with a letter confirming the employee’s eligibility or denial.
Tax Credit Calculation
Once an employee is certified as eligible for the WOTC, you need to determine the qualified wages that can be considered for the tax credit. Qualified wages are the wages on which you paid Federal Unemployment Tax Act (FUTA) tax during the employee’s first year of work. However, wages paid while receiving payment from a federal on-the-job training program or reduced by Social Security Act payments should be excluded.
Additionally, you need to identify the maximum allowable wages for each employee category, which depend on the target group. These limits can be found in the IRS instructions for Form 5884.
Claim the Work Opportunity Tax Credit
Use Form 5884 (or Form 5884-C for tax-exempt organizations that hired qualified veterans) to calculate the allowable credit based on the qualified wages determined in your tax credit calculation.
Enter the maximum allowable wage on Form 5884, Line 1A (for employees working between 120 and 400 hours) or Line 2 (for employees working more than 400 hours).
Keep a record of the certification and all supporting documentation for future reference and potential audits.
Successfully claiming the Work Opportunity Tax Credit can result in significant tax savings for your business while fostering employment opportunities for individuals from targeted groups. By following the steps outlined in this guide, you can navigate the process with confidence and maximize the benefits of the WOTC program.
Let Us Help
At Tax Credit Group, we specialize in helping businesses identify and claim various tax credits and incentives. Reach out to our team of experts to streamline the WOTC process and ensure you receive the maximum benefit from this valuable tax credit.
Business owners understand the importance of efficient tax credit processing for their businesses. Not only does it help to save time and resources, but it also reduces the risk of errors that can lead to costly consequences.
Here are some steps that a business can take to streamline their tax credit processing and minimize the risk of errors:
Keep accurate records
It’s crucial to maintain accurate and organized records of all tax credit-related documents, including applications, certifications, and supporting documentation. This helps to ensure that nothing is overlooked or misplaced, which can lead to errors in processing.
Verify eligibility requirements
Before applying for any tax credits, it’s essential to verify the eligibility requirements. This includes confirming that your business meets all the necessary criteria and submitting the required documentation to support your eligibility. Check out the IRS Tax Credits and Deductions page for a comprehensive list of available tax credits and their eligibility requirements.
Double-check calculations
Accuracy is critical when it comes to tax credit processing, so double-checking all calculations and formulas is a must. This helps to ensure that everything is calculated correctly, and there are no errors that could potentially cause problems later in the process.
Use software tools
There are many software tools available to help streamline tax credit processing, including those that can automate data collection, assist with record-keeping, and even calculate tax credits automatically. By utilizing these tools, businesses can significantly reduce the risk of errors and improve efficiency.
Work with a tax credit consultant
At Tax Credit Group, we can help businesses navigate the complex world of tax credits and ensure that they are taking advantage of all the credits available to them. We can also provide guidance on eligibility requirements, documentation, and calculations, reducing the risk of errors and maximizing benefits.
At Tax Credit Group, we’re committed to helping businesses navigate the complex world of tax credits. Call us at (563)583-2115 to optimize your tax credit processing and learn more about how we can help your business maximize its tax credit potential.
More and more, Americans are spending their time on the internet and small businesses are finding that if they want to connect with the customers, they have to be on the internet as well.
A 2019 study by the website Big Commerce found that not only are Americans turning to the internet for information, they’re also turning there to shop. The study found that only 9.6 percent of Gen Z (born between 1997 and the present) have purchased something in a physical store. The numbers are only slightly higher for Millennials at 31.4 percent, Gen X at 27.5 percent and Baby Boomers at 31.9 percent.
In other words, the internet is where the shoppers are.
But selling on the internet causes problems and a lot of paperwork for small businesses, in part because of a 2018 ruling by the U.S. Supreme Court.
South Dakota v. Wayfair
In 2018, the Supreme Court ruled that states can collect sales tax from a company even if the company doesn’t have a physical presence in the state. That’s different than the previous law which said that a state could only collect sales tax from a company with a physical presence (i.e. an office, manufacturing site, etc.) within the state.
This new ruling has determined that if there is an economic nexus within a specific state, then the state is within its rights to collect sales tax from the company. The word nexus is very important. States are now looking at exactly how much business a company is doing within their borders. If a company’s sales reach a certain threshold, then the company is considered to have a “presence” other than a physical one within the state.
For example, if a company makes $100,000 in sales in Arkansas in 2019, it has an economic nexus within the state. Arkansas also has a provision that considers any company that makes 200 sales or more within the state, to have an economic nexus within the state. In both instances, even though the company has no physical location in Arkansas, it must still pay the state’s sales tax.
Many major corporations were prepared for the fallout from the Supreme Court’s decision. While it may lead to a little extra paperwork for Wayfair, the truth is a company of that size can handle it.
The real problem is the smaller, mom and pop shops that now must navigate their way through each and every state to figure out if they owe sales tax and if so, how much.
How Congress is Dealing with the Fall Out of South Dakota v. Wayfair
Right now, several bills are working their way through Congress to try and help out small businesses.
H.R. 379 would negate the Supreme Court ruling and make it so states could not collect sales tax from a company that does not have a physical presence in the state unless the state has a law that requires sales tax to be collected on e-commerce sales.
H.R. 6724 introduced in 2018, would do something similar.
H.R. 1933 aims to ease the burden on small businesses by preventing states from collecting any sales tax from sales that took place before the Supreme Court ruling. It would also hold small businesses that do less than $10 million in online sales annually exempt from paying state sales taxes.
A bill introduced in 2018, H.R. 6824, would do something similar to H.R. 1933.
Sales Tax by State for 2019 (Updated July 2019)
Until things change, small businesses will be required to pay sales tax in each state that it has an economic nexus, in other words, a presence in. Below is a chart that looks at what each state’s sales tax is and what the state’s economic nexus is.
$100,000 or 200 or more separate transactions (effective 10/1/19)
Montana
0%
n/a
Nebraska
5.5%
$100,000 or 200 or more separate transactions
Nevada
6.85%
$100,000 or 200 or more separate transactions
New Hampshire
0%
n/a
New Jersey
6.63%
$100,000 or 200 or more separate transactions
New Mexico
5.13%
$100,000
New York
4%
$500,000 in sales of tangible personal property and more than 100 sales
North Carolina
4.75%
$100,000 or 200 or more separate transactions
North Dakota
5%
$100,000
Ohio
5.75%
$500,000
Oklahoma
4.5%
$100,000 in aggregate sales of TPP
Oregon
0%
n/a
Pennsylvania
6%
$100,000
Rhode Island
7%
$100,000 or 200 or more separate transactions
South Carolina
6%
$100,000
South Dakota
4.5%
$100,000 or 200 or more separate transactions
Tennessee
7%
$500,000
Texas
6.25%
$500,000 (effective 10/1/19)
Utah
5.95%
$100,000 or 200 or more separate transactions
Vermont
6%
$100,000 or 200 or more separate transactions
Virginia
5.3%
$100,000 or 200 or more separate transactions
Washington
6.5%
$100,000
Washington, D.C.
6%
$100,000 or 200 separate retail sales
West Virginia
6%
$100,000 or 200 or more separate transactions
Wisconsin
5%
$100,000 or 200 or more separate transactions
Wyoming
4%
$100,000 or 200 or more separate transactions
This chart is a look at where things stand currently, however, states and businesses are still getting used to these new rules and you can bet that they will change over the next few years.
It will be essential for any small business owner that makes sales online to keep tabs on what each state they do business in is doing.
The Upside of the Wayfair Supreme Court Decision
If there is one silver lining in all of this, it’s that it is possible this will force states to come to a collective agreement on how they tax e-commerce.
South Dakota is part of the Streamlined Sales and Use Tax Agreement put forth by the Streamlined Sales Tax Governing Board. The board was formed in 2000 to help “…simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance.”
According to the Streamlined Sales Tax Governing Board’s website it deals with the following:
State level administration of sales and use tax collections.
Uniformity in the state and local tax bases.
Uniformity of major tax base definitions.
Central, electronic registration system for all member states.
Simplification of state and local tax rates.
Uniform sourcing rules for all taxable transactions.
Simplified administration of exemptions.
Simplified tax returns.
Simplification of tax remittances.
Protection of consumer privacy.
As of July 2019, 24 states have adopted the policies of the Streamlined Sales Tax Governing Board and it’s possible that more will soon.
The Federal Government recently announced their renewal of the Work Opportunity Tax Credit Program. (WOTC) for 2015 through 2019 and that is really great news!
The WOTC program experienced some challenges in 2015 stemming from the late December renewal. Although the renewal was retroactive, it created a hardship for employers seeking to take advantage of these lucrative tax credits.
Due to the challenges last year, many people chose not to participate and apply for 2015 tax credits.
The most exciting news is that the IRS recently issued notice 2016-40. This notice makes 2 very important allowances you need to know about.
You now have an opportunity to go back and get your Work Opportunity Tax Credits (WOTC) by submitting ALL employees you hired between January 1, 2015 and May 31, 2016!
A new target segment has been added to the types of employees you can submit for tax credit. The new group is Long Term Unemployed and is available to all employees hired anytime in 2016.
With this provision ANY employer can currently submit all of their 2015 new hires for credit qualification!
This is a nearly unprecedented move by the IRS. Since the inception of WOTC in 1996, this is only the second time such an extension has been made available by the IRS.
RIGHT NOW is the absolute perfect time to get started and receive retroactive credits for all 2015 and 2016 new hires! This is the ideal scenario for all of you that were heavily considering WOTC last year but held off because of the pending renewal.
There’s only one catch! We Must get all of your 2015 new hires submitted ASAP! We don’t want you to miss any available Work Opportunity Tax Credits (WOTC) or have them delayed.
The official deadline to submit last year’s employees under this transitional relief provision is June 29, 2016, but we want to get your employees submitted ASAP before all the other companies in your state submit theirs. Procrastinating will increase the risk of missing credits or having your credits delayed by several months because other companies submitted before you. We will handle all the leg work for you, but we need to get started sooner rather than later.
To get an estimate of just how much your 2015 WOTC tax credits are worth, use our calculator HERE or contact us HERE and we’ll help you get started.
Don’t miss this opportunity and over-pay your 2015 taxes!
Progressive companies seem to have cracked the code of hiring teenage help and leveraging those employees as strategic assets. More specifically 16-17 year olds for seasonal help.
It’s true that there is a certain unflattering stigma associated with teenage employees, but it doesn’t mean that you should overlook this segment of the workforce. In fact, with an intentional plan you can sift through this unique talent pool and hire the best and take advantage of the benefits they can offer your company.
There are more than a few examples of teenagers behaving badly in their workplace scattered across the internet casting a shadow upon both their employer and fellow teen worker. This shouldn’t be a deterrent but rather an incentive to perfect your hiring process.
So why should you consider hiring more teens?
For starters, they have lower wage requirements than longer tenured employees resulting in lower overall payroll. Not to mention they seldom work enough hours to earn OT and often don’t receive the benefits of full time workers.
They can help expand your clientele to a segment of the population you may not have previously reached. Teenagers have dozens of retail options to visit after school, but they gravitate to those where their friends work.
You can begin relationships with quality individuals that become lifetime employees. The landslide majority of Chick-fil-A operators started working for the company during summers in high school.
The energy they have is both inspiring and infectious. Teenagers can often be labeled as lazy, but more often than not, it’s just boredom. Given a task and empowered to achieve it, you’ll be surprised at how creative and efficient they can be at problem solving.
As a final bonus, the Federal Government offers you a WOTC tax credit for each 16-17 year old hired during the summer. This could reduce your tax liability by up to $2,400 per teen hired.
These are just a few reasons to include teenagers in your candidate pool; especially for retail, seasonal help.
Progressive companies, like yours, have realized solid return on investment by carefully hiring teenagers. Teens help businesses diversify their workforce, attract young customers and increase your profitability. That means more bottom line, thanks to reduced payroll costs, sales potential and tax incentives.
If you’d like to learn more about how we can help your business improve your hiring and take advantage of the Work Opportunity Tax Credit (WOTC) program click here and we’ll be in touch shortly.
It’s official! The Work Opportunity Tax Credit (WOTC) program has been renewed for five years (2015 – 2019). Last week, Congress voted to extend the WOTC program as part of the Tax Extenders legislation, and received the President’s official signature of approval on December 19th.
This renewal is especially exciting as it is the first time in it’s history WOTC has received a 5-year renewal which is a testament to it’s success. Secondly, Congress has added a new target segment for Long Term Unemployed Recipients, which can qualify more of your employees and increasing your potential tax credits.
Here is the actual wording from the bill:
The term ‘qualified long-term unemployment recipient’ means any individual who is certified by the designated local agency as being in a period of unemployment which is not less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law.
This is precisely what employers have been waiting on all year. In a nutshell, the program provides participants tax credits up to $2400-9600 for each qualified, new hire brought on board. This renewal is a solid investment in the American dream and provides work opportunities for millions while providing businesses the capital to expand their businesses that will create even more jobs.
It doesn’t take long to figure out that this program can be a great way for companies to invest in their growth by significantly reducing their tax liability. To learn how much your potential tax savings might be, try our tax savings calculator here.
Corporations located in Kentucky may not be aware that they have state tax credits available to them in addition to the federal credits offered from WOTC. Hiring an unemployed resident could qualify you for as much as $100 for each eligible individual.
Businesses can qualify if their new hires are certified by the Office of Employment and Training as unemployed for sixty days prior to being hired into full-time employment. Individuals must also be employed full-time for 180 consecutive days during the tax year the credit is claimed. Full-time employment is defined as working 23 hours weekly or more.
The state of Kentucky considers applicants unemployed if they worked less than 23 hours weekly or 100 hours a month during the sixty days immediately prior to employment, and they must have had an employed status prior to the term of unemployed status.
There are a few exclusions to the program to be mindful of. Credits may not be claimed if the employee received federally funded payments for on-the-job training, is a relative of the employer, if the employer is an estate or trust, is a grantor, beneficiary, or fiduciary.
If your business is located in Kentucky, we can assist with educating and helping you obtain these applications and certificates. Just by making a few minor tweaks in your hiring process, you could claim extra tax savings. Give us a call today to learn more about these credits.
As most of you are probably already aware, the WOTC program was in hiatus from January until mid-December 2014. Therefore, the WOTC certifications are backlogged and many states are anticipating delays past April 15th. Some areas could see backlogs as late as August.
Given the circumstances, most of you will have a couple options to make the most of your pending certifications.
File your taxes on time and claim a portion of the credits.
Consider filing an extension in order to claim all of your 2014 certificates as a tax credit on 2014 taxes.
We would be happy to answer any questions to help you and your accountant make an informed decision. As always, you may reach us via email or by calling 563-583-2115.
As you may be aware, there are several tax programs awaiting congressional renewal. It isn’t uncommon for tax credit programs to lapse, particularly the Work Opportunity Tax Credit. However, currently, the IRS and lobbyists are urging lawmakers to vote on tax bills by the end of November to expedite the process. In the meantime, we suggest that customers file for extensions due to a potential backlog of approved credits, not just through WOTC but other pending bills as well.
Congressional leaders vote on factors aside from just renewing incentives. A few determinants include budget proposals, the length of time to extend incentives and whether to do so permanently or temporarily. Sometimes, leaders may re-write provisions to accommodate these fluctuations. With its’ size, WOTC lapses aren’t unheard of. Throughout its history, the tax incentive has been in hiatus several times since established in 1996.
The IRS has urged lawmakers to vote on tax bills to expedite the process. In the meantime, we suggest that customers file for extensions due to a potential backlog of approved credits, not just through our program but other pending bills as well.
Contact us HERE with any questions about tax credits and filing extensions.
