We are often asked "How can I reduce my taxes?". Unfortunately, the answer to that question can be complex and it often involves spending money. However, there are a couple of opportunities we want you to be aware of that can generate significant tax savings and may not require you to spend money other than what you already are as you operate your business.
The Work Opportunity Credit and the Research and Development Credit are great vehicles to saving tax in the right situation and often taxpayers don't know that they qualify for these credits. A tax credit is a dollar for dollar reduction in your tax liability. As far as tax law goes, it doesn't get any better than that!
Work Opportunity Tax Credit allows employers to receive a credit based on the wages they pay for certain categories of employees. These categories are very specific but some of them include: long-term unemployed, veterans, people with disabilities and people who live in certain targeted neighborhoods. To obtain the credit, you need to begin the process of making sure employees are certified by the state as falling into one of these special categories
before they begin working.
This is a specialized area of the tax law. To reduce your administrative burden there are firms that specialize in assisting employers to obtain these necessary certifications, and even better, you only pay them if you qualify for the credit. One company that specializes in this area is Retro Tax. If you are interested in more information, please feel free to contact us about the credit, or you can contact John Hess of Retro Tax at (815) 546-3166 to begin a conversation about their process.
The Research and Development Tax Credit is for businesses that design and develop products, formulas and inventions or improve processes and techniques. This credit is for businesses of all types and sizes. Recently the IRS made some favorable changes that will allow even more businesses to qualify. The credit is calculated based on the expenditures you incur for the items listed above.
Even if you feel you don't perform one of the items we listed above, it may be worth a discussion with someone who specializes in the Research and Development Tax Credit. Sometimes the most mundane change in what you do can qualify as research and development. Often a professional in this area will have a pretty good idea if your business is a good candidate for the credit from just a short phone conversation with you.
This credit is extremely complex, requiring the work of specialized accountants and engineers. As such, generally only specialized tax credit firms do this kind of work, and this makes the choice of the firm you are going to work with very important. If you are interested in more information, please contact us and we can provide more information on firms that specialize in Research and Development Tax Credits. These firms will talk with you to see if you are a candidate, as well as to ensure the credit will exceed their fee.
As always, we thank you for your continued business with Andaloro, Smith & Krueger, LLP.