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”

Dwyer-Ownes Testimony Showcases Value to Tax Credits

Kudos to International Franchise Association (IFA) Chairwoman Dina Dwyer-Owens, for her testimony before the United States House of Representatives Committee on Small Business, on Wednesday, September 30, 2009.

As part of her testimony, Dina addressed the importance of extending two categories of the WOTC tax credit program, born out of the Stimulus Bill, until such time as the national unemployment rate subsides. The following relevant excerpt from Dina’s testimony, would certainly favor our business at RetroTax.

“The American Reinvestment and Recovery Act also provided important tax relief to small businesses through the Work Opportunity Tax Credit and capital gains tax relief for businesses organized as S Corporations. The Work Opportunity Tax Credit assists franchise businesses in hiring unemployed veterans or youth who are not in school or already employed. This tax credit should be extended until our national unemployment rate returns to pre-recession levels. Additionally, I believe Congress can do more to assist our returning military veterans with the transition to civilian life, which I will mention in a moment.”

You may read Dina’s testimony in its entirety, at the IFA’s website. You may link to it directly, below.

www.franchise.org/capitalaccess.aspx

Five Things You Didn’t Know About Tax Credits, But Should

Many business owners and executives don’t know the first thing about wage-based tax credits. Frankly, that’s OK with me, especially since that’s what we’re all about. RetroTax was conceived to help remedy that problem and then assist with the administration of these very complex programs.

Business owners that do know about these programs often stray away from them because they seem too complicated to manage. Once again, RetroTax provides the fix to that dilemma. Here then, are five things you didn’t know about wage-based tax credits, but you should:

1) These programs are not only available to mega large corporations: In fact, wage-based tax credits are available for all companies – small or large. You don’t have to be the big guy to benefit from these credits – you just have to employ people. They need to meet certain demographic or geographic criteria, but odds are that some percentage of your employees will qualify for something.
2) In reality, almost any business employing 10 or more people will be eligible for something: So, don’t leave money on the table, especially in today’s economy. There could be significant amounts of money available, that you are missing, simply because you didn’t know these programs existed for you to benefit from.
3) Tax credits are like money in the bank, as they can be carried forward for as long as 20 years: So, even if you are not tax liable for some reason in the year you earn these credits, that’s no problem, you can hold on to them and apply them in future years.
4) Several of these programs are retroactive: Meaning that just because you didn’t know about this previously, you actually still go back and reclaim credits that you were eligible for, from the past three years.
5) April 15th is the only day to focus on for tax credits: WRONG. As many as eleven categories that qualify you for these credits only apply to future hires. So, each and every day that you wait could cost you thousands of dollars.

There is absolutely no reason why any business shouldn’t at least inquire about these possibilities. All it takes is a simple conversation and a little research into the possibilities. So, what are you waiting for. Give me a call today!

Solution to Washington Post Article

The article, titled “Small Businesses Brace for Tax Battle” suggests that small business owners are fearful of the potential increased taxes on their businesses. What should small business owners know about using tax credits to offset the increased taxing?

Small business owners have many opportunities to offset their fears of rising tax liabilities, by implementing one, if not more, of the many wage-based tax programs available to them, for creating jobs and employing people. From the Federal Empowerment Zone Wage Tax Credit Program, to Renewal Community Initiatives and Work Opportunity Tax Credits, to similar state programs, available in many of the lower 48, the options are many. It’s actually safe to say that on average, 10-15 percent of the W2s that run through a business owner’s payroll in a given year could be worth, an average, $1,500 per person (depending on which of the myriad of wage-based tax credit programs they may qualify for) per year. Take a typical two store, fast-food business with 40 people on the payroll; and a 200 percent turnover of personnel. In this example, the business owner would then be managing an average of 80 W2s and chances are that eight to 12 of those employees past or present, could produce tax credits, averaging $45,000 ($1,500 Credit X 10 W2s X 3 Years = $45,000). That’s REAL money to any small business owner. Do you feel the media and small businesses still need to be educated on the power of tax credits? Most certainly, that’s what we and our franchisees are in business to do. Communicate and educate business owners to the value proposition of these tax credits and moreover, to then guide them through the process of maximum utilization of these opportunities. The media is usually very interested in helping us spread the word, once they discover how powerful an opportunity we provide for small and medium business owners in the communities that they serve.

What is missing in the education? Nothing that can’t be remedied, with the strategic placement of more RetroTax franchisees, in markets where these credits abound. They will then continue to spread the word to business owners, in the communities that they serve.

Often, when approached about the possibility of having thousands of dollars sitting unclaimed, business owners usually respond by saying, “this just sounds too good to be true.” I agree, It does sound too good to be true, but that notwithstanding, it is true. I simply encourage any skeptics to Google IRS Publication 954. This publication spells it all out and validates the reality of these programs. What it doesn’t do though, is tell a business owner how to administer them.
That’s where we come in.

Tax Credits and Tax Credit Administration Popular During Economic Struggle

These days, business owners are instantly excited by the prospect of tax credits being available to their business, as these credits and incentives can improve the bottom line – which is welcomed in any economic climate, but especially now.

The most popular tax credits that RetroTax administers are the empowerment zone and renewal community credits. The reason is that an eligible business owner can not only claim the credit for the open tax year, but can also reclaim, on a retroactive basis, taxes for as many as three years previous to that, for credits that could have been, but were not, claimed.

Once business owners discover that they do indeed have credits awaiting them, they also find out what it takes to claim these credits, is no walk in the park. Business owners cannot administer these credits on their own for the same reason that virtually nobody can close a home loan by themselves. The amount of knowledge, paper and detail makes it virtually impossible for even the most sophisticated businesses to do this on their own, especially when a company like RetroTax will do all the work for them, with no set up or consulting fees, strictly on a contingent fee basis.

Business owners are impressed by the fact that we only get paid if we produce results and therefore understand, that the results that we produce are the best possible.

Some business owners are skeptical when we tell them about the availability of these credits – however, typically anyone that employees people will, on average, find that there are some percentage of those on payroll that qualify for wage-based tax credits. In fact its usually no less than 10 – 15 percent of those that they employ. It really depends, though, on the type of business that they operate, and sometimes, where the business is located. In manufacturing and food service though, as just a couple of examples, these percentages are usually much higher.

More businesses are coming to RetroTax for tax credit administration in this economy. First, because they are hearing about what we do and are wanting to simply learn more. Once we educate business owners to the legitimacy of these opportunities, (as spelled out in IRS Publication 954), it is merely a function of getting the process underway. In any economy, I know of no one that wants to pay more than his fair share in taxes. In times like these though, when we tell a business owner that we can legally mitigate his tax burden, it’s music to his ears.

For more on our tax administration services, visit http://www.retrotax.com/