No Need to Break the Bank

While recent and ongoing economic concerns have forced many businesses into a state of retreat, with regard to hiring and employee retention, there can be a brighter side to these issues and concerns, especially in times like these. An often overlooked opportunity to offset these concerns can be found in the identification and administration of wage based tax credits costs. Surprisingly, many companies look past these opportunities, or fail to maximize on their full potential. In many case, the administrative burden required to claim these credits is why they are left unclaimed.

Many don’t realize either, that many of these tax credit programs are both for the current year, as well as for years retroactive. C corporations redeem these credits corporately, while they pass through to principal owners of S-corps, LLCs, partnerships et al, as dollar for dollar credits against personal tax liabilities. In any case, it’s usually nothing more than a lack of knowledge that prevents many business owners from redeeming what could otherwise be a windfall for their businesses.

In the current economic environment, anyone with a fiduciary responsibility should do whatever possible, to help enhance bottom line opportunities for their companies and shareholders. Finding incremental opportunities to enhance the bottom line and operating as soundly as possible is not a luxury in today’s economic environment – it’s a necessity. The amount of money that these credits could potentially represent is significant and substantial.

What tax credits are available?
From the Federal Empowerment Zone Wage Tax Credit Program, to Renewal Community Initiative, and the Work Opportunity Tax Credits, the options are many. While the suggestion of tens if not hundreds of thousands of dollars, or more, sitting unclaimed, may sound too good to be true, it is nonetheless, entirely possible. In fact, it is safe to say that 10-15 percent of all of W2s generated in a given year could be worth on average, $1,500 per employee (depending on the tax credit program) per year.

The Federal Empowerment Zone (FEZ) Wage Tax Credit Program is an incentive program created to revitalize the economies of select communities across the country. These zones are located in many of America's biggest cities. Specifically, the FEZ program provides employers with a federal income tax credit of up to $3,000 per qualifying employee per year and offers three years of retroactivity.

Because of geographic constraints, the FEZ credits will not apply in all cases. Another credit opportunity is the Renewal Community Initiative (RC), which mirrors the FEZ credit in terms of rules and retroactivity. The significant difference between them is that the RC credit provides a federal income tax credit equal to $1,500 per qualified employee, per year, but the qualifying geographic areas are usually much larger. In all other ways, the RC credit program is basically the same.

The Work Opportunity Tax Credit (WOTC) program is a program that provides businesses with a federal income tax credit that can be as high as $9,000 per eligible employee. Unlike the FEZ or RC program, this program has no geographic restrictions or boundaries. Also unlike the FEZ or RC program, it only allows a one-time credit for new hires, on a go-forward basis. There is no opportunity for retroactivity with WOTC. These credits are available if your new hires fall into any one of nine different categories, including qualified veterans or disconnected youth.

Identification and administration of these programs is not a simple process. It takes time and the procedures are onerous, which is why so few undertake this task without the help and assistance of professionals.

When to begin capitalizing on these tax credit and incentive programs?
Right now! All tax credit programs have deadlines. Retroactive tax credit programs allow you to capture credits in the open tax year as well as from the 3 prior years. For example, once you close the books on 2009, you will no longer be able to claim credits from 2006.

How are these credits generated?
Eligibility for redemption of these credits is determined through client qualification interviews, including discussions with client’s internal and outside tax counsel, regarding the implications of these potential tax credits. This enables and empowers the tax preparer to optimize the value of these federal or state income tax credits, as part of the client’s overall tax strategy.

Several of these programs provide retroactivity and actually allow the recapture of overlooked credits from past tax years. Excess credits can be carried forward as many as 20 years. Many of these tax credit programs can be combined to increase the value of benefits (i.e. special hurricane related credits, GO Zone, etc.). Once the client’s “appetite” for these credits has been determined, the process of administering, optimizing and delivering value from each of these programs begins.

Historically, the majority of our client business is generated directly, or through alliance partnerships with professional service firms. Many of these relationships are at the local and regional levels, but a growing number are national alliances, with companies like Ceridian, Ryan and RSM McGladrey.

PUTTING ALL OF THE PIECES TOGETHER
ACI/RetroTax® is a full service tax credit administrator of federal and state tax incentive programs. We specialize in identifying both demographic and geographic federal and state tax credits. During our 12 year history, we have produced significant financial gain for our 1,500+ nationwide clients, by administering millions of dollars in wage-based tax credits annually.

We provide tax credit administration services for clients of all sizes, small entrepreneurs to Fortune 500 companies. In addition, we serve as “behind-the-scenes” tax credit administrators for large accounting firms, payroll companies, and professional employment organizations (PEOs).

RetroTax Procedures
· We work with your CPA to determine the ability for your business or shareholders to utilize credits.
· We research and analyze all information to identify eligible sites and employees.
· We provide reference maps showing the locations of qualified sites and employees within a federally designated Empowerment Zone or Renewal Community. (FEZ/RC)
· We communicate with state Labor Departments, to obtain certifications of eligibility for all eligible employees that qualify for demographic credits. (WOTC).
· We work with your internal and external Finance/HR teams to implement, manage and maximize the redemption of credits from all qualifying programs.
· We keep you abreast of all pending, current and upcoming program legislation.
· Our fees are 100% contingent upon performance.
· Absolutely no set-up fees
· Absolutely no hidden fees
· No credits…no fees

“We do the Work… You take the Credit”