Did You Know You are Missing Money?

While there are billions in tax credits and incentives available to business owners each year, only a fraction are claimed. As we approach the end of another year, business owners should become better educated on what tax credits are available to them and how to collect them.

Tax credits are issued by state and local governments for a variety of reasons. As it pertains to the work that we do at RetroTax, these are employment or wage-based credits that are offsets to a business owner’s personal or business taxes. These credits are earned for the jobs that the employer has created for certain demographic groups or because the place of employment and the employees residence are located within one of nearly 200 geographic zones that the Federal government has slated for development.

The demographic credits are “one-time” events per new hire and can be equal to as much as $9,000. The geographic credits can be worth as much as $3,000 per year, per qualified employee and can actually be recaptured from the past three years (thus our name, RetroTax). Most everything that we do at RetroTax starts with a look back, then ahead. More about these credits and their values can be found on our Web site at http://www.retrotax.com/ under the tab titled “services”.

Over recent years, some notable tax credits have been added, especially for those businesses in areas where Mother Nature has taken a swipe at us and left victims of storms such as Katrina and Wilma and more recently, the floods in the midwest.

As for who can collect tax credits, who ever said that size matters? Most business owners, regardless of size, employing people that are not immediate family, may benefit from these credits. The point is, no matter how big or small your company, you should not pass up the opportunity to at least explore how much money you are missing by not redeeming these credits.

Again, for more information, visit http://www.retrotax.com/

So, What are Federal Empowerment Zone Credits Anyway?

When I decided to create my blog, I wanted it to be an informational, if not educational outlet for industry peers, as well as business owners and executives across the nation and around the world. One of the primary functions of the RetroTax concept is to communicate and educate. We make our living teaching employers how they may benefit from those that they employ.

This is important, because it’s usually nothing more than lack of knowledge, that prevents many business owners from redeeming what could rightfully be theirs, namely, BIG $$$. There are several elements of the Federal Wage Tax Credit Programs, but today, let’s focus on Federal Empowerment Zones.

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 often located in some of America's biggest cities: Chicago, NY, LA, San Antonio, are among some of the many. Specifically, the FEZ program provides employers, with a federal income tax credit of up to $3,000 per qualifying employee per year. Employers’ facilities or work sites must be located in the zone and employees must also live in the zone.

The FEZ credit is 20 percent of the first $15,000 ($3,000 max.) of an employee’s annual wages. Employers can take this credit for each qualifying employee through 2009 and apply it directly to their corporate tax liability. (Legislation is currently pending with strong bi-partisan support, to extend this program until 2016) In the case of “S” corporations, LLCs, Partnerships or sole proprietorships, these credits pass through and may be applied to individual shareholders’ or owners’ personal tax liability. In addition, credits are retroactive for 3 years, so that credits of up to $9,000 per qualified employee may be realized in the first year that an employer has us administer the program.

For purposes of this illustration, let me provide you with some insight as to the powerful impact that these credits can have on an average small business owner, when his business is located within the boundaries of one of these zones. For the purpose of this example, let’s take a multi-unit restaurant operator, owning 3 Quiznos, Blimpie’s or Subway type restaurants. Again, for the purposes of this model, I will suggest that each location employs 15-20 part/full-time employees at any given time, and that there would be an annual employee turnover rate of (+/-) 300 percent. Simple arithmetic tells us that this business owner generates (+/-) 180 W2s per year. If only 10% of his annual hires also live in the Empowerment Zone and are therefore, geographically tax credit eligible, the numbers would be compelling. The likelihood is that an even greater percentage of his hires would be eligible for these credits. Let’s take a look at what that means to the business owner:

Federal Empowerment Zone Credits
2008 Tax Year – 180 total hires (X 10%) = 18 qualified employees X $3,000 = $54,000

This program is retroactive allowing the business owner to potentially also claim credits for the previous 3 years.

2007 Tax Year - 180 employees (X 10%) = 18 qualified employees X $3,000 = $54,000
2006 Tax Year - 180 employees (X 10%) = 18 qualified employees X $3,000 = $54,000
2005 Tax Year - 180 employees (X 10%) = 18 qualified employees X $3,000 = $54,000

Identifying and administering these credits could potentially make or break it for many small and medium sized businesses owners, especially in these challenging economic times.

In this illustration, the small business owner could have potentially realized up to $216,000 in personal tax credits during the first year of this program’s administration. How many sandwiches would he have had to sell, to achieve that kind of windfall? What’s best is he could even carry these credits forward for as long as twenty years, if he couldn’t take full advantage of them in the current tax year.

To learn more about these Federal Empowerment Zone Credits now and where they are located, visit our website at http://www.retrotax.com/. Stay tuned for future posts to this blog, for more about Renewal Communities, Rural Renewal Counties and the Work Opportunity Tax Credits.

RetroTax ...More Than Recession Proof – Recession Friendly

I've really been feeling the pain of late, for many of my franchise brethren in the world of brick and mortar. Many franchisors and franchisees are struggling in this downward economy. With election year uncertainty, the rising costs of fuel and essentials, consumers are starting to tighten their belts and spend less. Franchisors and franchisees too, face similar problems, with rising costs of goods and overall increased costs of doing business. Additionally, many must now deal with tariffs and surcharges that have recently been imposed by suppliers and distributors that have no choice but to offset their rising fuel costs, in order to get products delivered to the franchisee's door. This leaves everyone fighting for every last penny and lately it seems, there are fewer pennies to go around.

Now, I'm not for a moment suggesting that we're bulletproof, but these kinds of problems pose no challenges at RetroTax. Sure, we too must fight for business in a competitive marketplace, monitor our expenses and cashflows, but we don’t face the challenges that most others do in a downward economy. In fact, our clients look to us to help them offset some of the negative cycles that this type of economy bestows upon them.

Since we help them redeem unclaimed tax credits and incentives and only charge a contingent fee for what we produce, our clients experience no up-front costs for doing business with us. Our brand actually thrives in a downward economy. More and more businesses looking for ways to offset rising costs, want to avail themselves of our services. While this is great for us, it will be even better for our franchisees.

When business is good and cash is flowing, our service makes nothing but sense for our clients. When business is bad and things tighten up, our service moves from just being a good idea, to something a bit more compelling. In this economy, our franchisees will have the ability to establish a solid client base now, and see it expand exponentially as the economy recovers. Now though, is a great time to begin building a book of business.

In times like these, those thinking about career changes and/or making the leap to business ownership, must really be cautious about what they consider. For first time franchisees in retail or food concepts, start-up and working capital requirements are quite likely higher today, than just a year or two ago. Alternatively, there are concepts like ours, that do not face the challenges of those increased costs. Our franchisee profile is that of a former executive, or one possessing high level, intangible sales experience and who will quite likely work from home or an executive suite. There are no expensive leases, build-outs, or equipment packages. (beyond perhaps those things that most people already possess, i.e. a computer, a printer, a PDA, a personal vehicle, and some working capital to see you through your start-up)

As odd as it might seem, a downward economy is actually somewhat positive for us, as the opportunities to build a client base increase, along with those looking for franchise opportunities that do not include expensive start-up costs. To me it all spells something that goes beyond recession proof, all the way to recession friendly.

Launching a Franchise... Not As Easy as One Might Think

It was just one year ago that my partner, mentor and friend Al Newcomb and I began the process of launching the RetroTax franchise, built on the foundation of years of success with his affiliated company, Associated Consultants, Inc. (ACI) Now, one year later, we are finally in the position to begin inviting prospective franchisees to join our system – which is a complete relief.

Heading into the process, I knew we’d hit some bumps and snags, as RetroTax is a first of its kind, unlike any other, fresh, new brand. Getting our disclosure documents approved nationwide has taken longer than I hoped, but, now, FINALLY, we are able to begin strategically offering our opportunity to franchisees. I must say, the ride has been well worth it, but I think I can liken it to building a new house, rather than buying one that was previously owned. All right, I’ll quit whining, because the truth is, while I don’t think I’d EVER want to do it again, I am richer for and have relished the experience.

This truly is a franchise opportunity like no other that I have ever seen. Each and every one of my peers that I have discussed this with over the course of the past year has been smitten by it as well. For aspiring franchisors, I offer this piece of advice: Patience is a virtue and like most impresarios, I fall really short on that P word.

One place where I may see some things differently than some of my peers, is in the discussion of unit growth and numbers. A lot of companies boast about how many units they will be adding in the coming years, proud of their growth and development. At RetroTax, our growth will be proactive and strategic, just like the development of our systems. We will only add six operating franchisees in year one – even though we have many more knocking on our doors. When I was a food franchisor, I always knew how to measure the need for additional head count internally, to support a given number of units added in the field. Given the newness of this business though and the fact that we will not only support our franchisees, but also provide services to and for our franchisees’ clients, we’re going to take a slower, more strategic and systematic approach to our development.

Not for nothing, but when it comes to bragging about numbers, my belief is that the only numbers that really count, are the numbers being generated by those that are already in your business, not the number of new units you are planning to add. Are your existing people making money with your business model? If not, adding more is not where your attention should be focused. We are going to do this right at RetroTax.

It's with a breath of fresh air that I happily say, "we’ve finally arrived– HERE WE ARE!"

Come on CNN, Where’s the Rest of the Story?

Was Paul Harvey the only member of the media that could tell the whole story? While it seems that the media has no problem with covering tax issues, they rarely demonstrate a true understanding of exactly what a tax credit is – and how tax credits can sometimes bring more to the bottom lines of business owners, than the products or services that they are in business to provide.

One example is a recent story by CNN – Hire an Ex-Con in Philly, Get A Tax Break.

While this story did a nice job of presenting the local spin on a Philadelphia program being offered for employers that create jobs for ex-offenders in Philly, it didn’t mention a single word about the treasure trove of Federal credits available to qualified business owners in the Philadelphia Federal Empowerment Zone and/or Renewal Community. What's up with that?

Stay tuned, for future posts, that will talk about a very special set of services that RetroTax provides to forward thinking visionaries in both the public and private sectors. I will explain how these programs are helping ex-offenders get a fresh start in life, while at the same time drastically reducing the rate of recidivism in these local communities.

New York and California, Here We Come.

While not newsworthy to many, RetroTax has been approved to award franchises in the states of New York and California. What that means is we are one step closer to being able to offer our great franchise opportunity in all 50 states. We’re still awaiting clearances from some of the registration states in between, but we are happy to have passed muster in both of these critical states.

It has been an exhausting and frustrating ride “giving birth” to a new brand, but I wouldn’t have traded the experience for anything. There are already some prospective franchisees in the pipeline, while others still await disclosure, but all good things will come with time. My partner Al and I are doing our best to learn how to be PATIENT!