Tax Credit Homework for Your Prospects

If you are like most CPA professionals, you find prospective clients from many sources. You may have been asked to bid on tax work by a company, or introduced to a prospect by a commercial banker, or talked with an existing client that has a tight connection to one of your target prospects.

What homework do you need to do before your initial meeting so you can leverage tax credits to help win the business? 

Tax credits are based on activities that the company has done or plans to do. There are many indicators of these activities (such as costs and hiring) that may signal tax credit opportunities (retraining employees or adding jobs, for example). As a CPA, you often have access to these indicators to help with the homework you need to do. Here are a few ideas:

  • Tax returns: This contains lots of information about tax credit activities that may qualify (i.e., IRS form 4562 Depreciation) and tax credits utilized in prior years. For example, review the state income tax returns, look for any Claimed Tax Credits and the Credit Type Code (for Georgia, click here for listing of codes).  Make sure to check the entity and shareholder individual returns.
  • Financial Statements: Balance Sheet, Income Statements and year-to-year comparisons contain a wealth of information and indicators of potential tax credits (such as consulting fees, payroll cost changes, operating leases, capitalized software and other items).
  • Physical Changes: Look at classifieds, job openings, moving announcements, LinkedIn, and the company’s website press releasesDrive by their site – any new construction, is the parking lot full?

So do your tax credit homework. Your preparation and situational knowledge will really help you win the business!