Believe it or not, your clients’ payroll systems contain key data to help you find them tax credits! Whether they use an outside payroll provider or internal payroll software, it’s important to discuss this with them. For example, the Georgia Retraining Tax Credit and the Job Tax Credits in many states are dependent on details that can only be found in the payroll systems. Here are a few items to keep in mind regarding payroll systems and tax credits:
- Employee Data – employee ID (not SSN), job title, pay rate, hire & termination date, state resident, location and Quarterly Georgia DOL-4 details.
- Access to historical data – important for prior years and trend analysis.
- Ability to download details to spreadsheets – Since each tax credit has its own unique requirements, it’s important to be able to analyze the data as needed.
- Georgia payroll withholding taxes – Ask the outside payroll provider about their actual experience with utilizing tax credits against Georgia payroll withholding taxes (click here for the form and list of qualifying tax credits).
Many payroll companies offer sophisticated Human Resource Information Systems (HRIS) that provide additional features that may be beneficial. For example, monthly headcount by location and analysis of employee transfers versus new hires are critical when your client has multiple locations throughout Georgia. Some locations may be in special Opportunity Zone or Military Zone tax credit locations.
Helping your clients understand how payroll helps with tax credits strengthens your client relationships!
Now that the October 15 tax deadline is behind us, the fun begins withreaching out to your clients about year-end (2013) and next year (2014) tax planning. After you have finished your psychotherapy/Dr. Phil discussions, then you can get down to what matters – helping your clients minimize their taxes. And state tax credits can potentially be a big part of their strategies.
Commercial bankers are telling us that more and more companies are borrowing money to upgrade their business software. This may include Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Document Management Systems (DMS) and other company wide systems. The bankers say that many companies are accelerating adoption of e-Commerce, mobile apps and other new technologies.
With all of these changes, clients need your advice about alternatives best suited for them. After you have discussed deductions, accelerated depreciation, and upcoming 2014 tax changes, don’t forget training tax credits. If your client starts their implementation soon, they may be able to maximize their tax credits in 2013 AND 2014 (in Georgia it’s $1,250 per employee per year). PS – Don’t forget about your own firm for tax credits – you many have already done something that qualified & didn’t realize it!
With the economy recovering in some areas, companies are starting to re-invest in their operations. These investments (such as software upgrades and head count increases) may qualify for state tax credits. Unfortunately, some companies may not have the income tax liability capacities for these tax credits in the near term. But in many cases, state tax credits earned can be carried forward (up to 10 years) and may show up as Deferred Tax Assets on the balance sheet.
Depending on a company’s tax structure, there may be benefits to these carried forward tax credits:
- C Corporation: the tax credits will increase the company’s assets on the balance sheet. This will be beneficial to investors and bankers that consider assets for valuation purposes. In addition, acquiring companies may be able to leverage these tax credits in the future.
- Pass-through (such as S Corporation , LLC, LLP, and others): individual equity participants could benefit from personal “deferred tax assets” that could be utilized to off-set future income tax liabilities (i.e., spouse income increases, their business is sold, and other items). Include this in discussions with the client’s wealth management team.
So remember to reach out to your clients to discuss their company and personal asset planning. A deferred tax credit today may cover a tax liability tomorrow!
We have heard a lot of concern about the new ACA healthcare program (also known as the Affordable Care Act, Obamacare, and other names) that starts in 2014. Many companies are considering big employee changes, such as reducing headcount, moving employees to part-time basis, and leveraging staffing firms/independent contractors. But be careful — these changes could negatively impact your clients’ tax credits and their net after tax savings.
We recently attended the Georgia Chamber of Commerce’s conference on the new Federal Healthcare program (click here for upcoming sessions). Watch out for these state tax credit variables:
- Number of employees – different programs for small groups (49 or fewer employees) and large groups (50 or more employees), based on Full Time Equivalent (FTE) employees.
- Employee – employees that work 30 hours/week or more must be offered coverage.
- Unknowns – lots of unknowns such as affiliated service group impact, common law employee clarification, and play-or-pay penalties.
- Federal Small Business Health Care Tax Credits – may be available (company has 24 or fewer full-time employees and less than $50,000 in average employee wages, click here )
The following Georgia tax credits may apply to your clients’ employees:
- Retraining Tax Credit – Each employee must average 24 hours/week or more and can include regular and leased employees
- Job Tax Credit (including Opportunity Zones, Less Developed Census Tracts and other) – Each employee must average 35 hours/week or more and can include regular and leased employees
Your clients may think they are saving $ by making these changes, but their net after tax credit savings may not justify the changes! For example, if employees are reduced to less than 30 hours/week, the Job Tax Credit can’t be utilized, since the total head count for employees (35 hours/week) goes below the Job Tax Credit head count minimum threshold. Pretty confusing! So get on top of this now, and reach out to your clients to discuss these issues.
We have heard several issues related to snail mailing Georgia amended income tax returns to DOR, especially when tax credits have been added. Make sure you send it to the correct address (AND use a USPS CertifiedMail Receipt form).
Here are the mailing addresses:
Georgia Department of Revenue
Form 500X (individual):
P.O. Box 740318
Atlanta, GA 30374-0318
Form 600 (C corporation):
P.O. Box 740397
Atlanta, GA 30374-0397
Form 600S (S corporation):
P.O. Box 740391
Atlanta, GA 30374-0391
Form 700 (partnership):
P.O. Box 740315
Atlanta, GA 30374-0315
(Click here for details)
Good luck with tax season!
With the March 15 tax filing date approaching, you may be facing a dilemma for a pass-through entity, especially if your client wants to file shareholder individual returns by 4/15. What if they plan to submit tax credits but may not have the tax credit documents completed on time? Here are some options to consider:
- Extend the state corporate income tax return (only need to extend state, not federal), then file individual returns on 4/15
- File the state corporate income tax return by 3/15 without tax credits, then amend the state corporate return for tax credits applied, distribute amended K-1s, and file individual tax returns on time by 4/15
Tax planning with your client really pays off in keeping your clients happy!
Your physician practice clients may feel that they are on top of Meaningful Use due to their new EHR software. However, it is unfair for them to ask their EHR software to do everything for Meaningful Use. In fact, if they passed every measure reported by their certified EHR, they could still fail an audit and be required to give back the Meaningful Use $ they received.
For more details, I found a good article that highlights these potential gaps (click here).
Continue reaching out to your healthcare clients, and see how you can help!