Running a business can be stressful, not only do you need to tend to operational requirements, but you also need to ensure that you manage your books and pay your taxes on time and in a manner that complies with the IRS requirements. The only relief for businesses is the tax laws that allow you to claim back expenses that relate directly to your business’s ability to drive revenue. The sad part about this is that many businesses aren’t fully aware of the deductions, and often miss the opportunities for tax breaks that could save them money.
We look at some of the state and federal tax credits and incentives your business may qualify for that are easily overlooked.
Federal research tax credit
The federal research tax credit incentivizes new product developments and process improvements within your business. Qualified research expenditures can include employee wages for the development of or supervision of qualified research and development (R&D) efforts, raw materials or supplies used in qualified R&D efforts, and on-shore contractor costs used in qualified R&D efforts. To qualify for this incentive, business activities must meet IRS guidelines.
Federal work opportunity tax credit
This federal tax credit is available for businesses that hire and employ people from certain groups who have faced significant barriers to employment. Businesses that qualify for this credit can receive up to $2,400+ per qualified new hire, including unemployed and/or disabled veterans, felons, and recipients of government assistance such as food stamps, Temporary Assistance for Needy Families (TANF), unemployment benefits, and Supplemental Security Income (SSI).
Federal employee retention credit
Businesses that experienced a significant decline in gross receipts or a full or partial suspension of operations due to a governmental mandate may qualify for up to $5,000 per qualified employee per year in 2020 and up to $7,000 per qualified employee per qualified quarter in 2021. Because this credit requires a thorough analysis with proper supporting documentation, we recommend consulting a seasoned expert in tax credits.
Georgia retraining tax credit
Eligible businesses could qualify for a tax credit worth 50% of qualified training costs, up to $1,250 per authorized employee for new software, technology, and equipment learning–including new features, functions, or modules. Eligible training costs include employee wages for learning, vendor fees for training, internal employee trainer wages, training development costs, and reasonable travel expenses. Today’s businesses rely on technology, and many qualify for this credit without realizing it.
Additional tax credit opportunities
There are many more state and federal tax credits available. Since tax credits are designed to incentivize business growth and development, you may qualify for tax credits based on other business activities. Have you added any new locations, created new jobs, invested in new equipment or technology, or developed a new product or technology? If so, you may be eligible for additional tax credits and incentives.
It’s never too early to start thinking about the following year’s tax filing and developing a strategy on how you can improve. If you haven’t already started planning your taxes for 2023, now is the best time to get started. Knowing what credits you’ll qualify for can prevent you from overpaying so you can hold on to your cash.
If you would like a free comprehensive State and Federal Tax Credit Analysis for your business, you can reach out to David McMillian, President, at McMillian & Associates.
Having the correct tax strategy in place also requires having your books and the accounting side of your business in order. At Fusion, our CPAs are experts in organizing the clutter in your books to ensure a smooth tax filing process.
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This blog article is provided by our tax-incentive partners, McMillian & Associates. It not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.
