Category: Federal Job Tax Credits


Tax Incentives “Below the Line”

Tax incentives that impact a company’s income taxes are considered “below the line.”  They are not part of the EBITDA calculation (Earnings Before Interest, Taxes, Depreciation, and Amortization) and only benefit income tax payers.  But tax payers may be the company itself (such as a C-Corp) or individual shareholders (pass-through entities).
Many tax incentives for companies are based on activities that the company has already done or plans to do.  Depending on the type of company and location, a company may be able to benefit from the following Federal and State tax incentives and related activities:

Federal

  • Research and Development Tax Credits — new products or new processes
  • Work Opportunity Tax Credits (WOTC) — hire new employees that have specific backgrounds
  • Section 179-D Deductions — energy incentives for buildings
  • Cost Segregation Studies — reclassify building costs of new construction

State (Georgia Example)

  • Research and Development Tax Credits — new products or new processes
  • Retraining Tax Credits — train existing employees
  • Job Tax Credits — new job additions
  • Investment Tax Credits — new land, buildings, and equipment

If your clients are paying income taxes, remember to review their current and planned activities to find their “below the line” tax incentives — they will thank you for helping them save money!

JimSig

Don’t Forget Tax Credit Reviews During Tax Season!

This Tax season is getting started with the annual goat rodeo of collecting and reviewing client data. You have probably already mailed, emailed, called, and reminded your clients that “it’s that time again.”  Well, so that you won’t sound like a dentist (as in, “this won’t hurt too much”), make this a more cheerful experience by asking your clients about their activities that may qualify for tax credits (click here for the Alpharesults Tax Credit Summary).

JimSig

Watch Out for Tax Structure Changes!

Now that tax season is here, the fun begins. Clients are probably dumping their tax documents (electronically and physically) at your office and asking when their tax returns will be completed. As you dig through all of the details, you discover some changes the client forgot to mention that will impact their taxes.

We had a similar situation recently.  The client’s tax structure changed – they converted from a C corporation to an ESOP (100% S corporation), so they no longer pay income taxes.  The client didn’t tell us about this change.  Meanwhile, the client spent time and resources to collect their state tax credit documentation.  As usual, we helped them get the tax credit certification and delivered it to their CPA.  The CPA didn’t know what was going on since he had already talked with the client about the change. The client forgot that paying no taxes meant that they could not use tax credits.

If your clients have utilized tax credits in the past, you need to help them understand (and beg for no surprises!) their potential to utilize the tax credits in the future.  Major changes in tax (such as tax structure, future NOLs, equity ownership and other items) can have a major impact on the ability to use tax credits (and save your client time and resources).

JimSig

New Market Tax Credit

Your clients could benefit from a tax credit they can’t even take themselves!  Banks and other investors can leverage the Federal New Market Tax Credit (NMTC) to provide lower cost funds to companies (such as your clients).  This tax credit is intended to spur revitalization of low income and impoverished communities.

We talked with Eric Rosen, SunTrust Bank (Click here to contact him).  He is involved with the SunTrust Community Capital group (click here).  Here is an overview of what he had to say:

A company that qualifies can receive lower interest rate loans and/or gap financing.  It must be located in designated areas (Click here for locations).  The company must use the funds to create significant economic impacts, i.e., jobs, tax revenues, services for low-income persons, etc., and must demonstrate a need for subsidized financing.  Funds are for a 7-year time period and can be used for numerous purposes including real estate, equipment, working capital, etc.

If your clients are looking for lower cost funding, help them find out if they qualify!

JimSig

Tell your clients about tax credits — so they won’t have to ask!

We got great feedback from last month’s article about “Why didn’t my CPA tell me about tax credits” (click here).  You sent us comments and concerns about engagement letters, law suits, being too busy and not knowing what to look for.

How can you find out if they can utilize tax credits?  With tens or hundreds of corporate clients, you have a hard time keeping up with them all.  Bottom line: most of the Georgia tax credits are for companies that are investing in themselves.  This includes adding jobs, expanding, moving, implementing new software, and many other activities.  One way or another, all of these investments show up on the accounting and tax related documents that your client provides to you.

Some CPA firms have incorporated data mining IT tools to analyze these documents (such as flagging any clients whose capital assets increased more than $100,000 year-to-year).  Others visit their clients on site to pick up these documents and spend time talking with their clients about their business. Still others rely on “opt in” check boxes in their client communications — not very effective if the client doesn’t already understand tax credit opportunities!

We are hearing more and more recently that clients are shopping all of their professional service providers – including CPA services.  Make sure your clients know about your value by letting them know that you are doing more that just keeping them compliant – you are trying to help them save money with tax credits!

JimSig