Two Weeks Until Tax Day – For Many Businesses Though, It’s Still Not Too Late to Benefit From Tax Credits

While the media is certainly hot on the topic of taxes as we approach April 15th, the topic of “tax credits” is one that our clients talk with us about all year long. In fact, our rush began around January 1 and ran through the deadline for the first quarterly filing date for corporations, which was March 15.

When it comes to business vs. individual tax returns, the biggest myth of all, is that April 15 is tax day. While true for individuals, corporations are on quarterly cycles, with March 15 ending the busiest time of all, for those in the corporate tax world. Many companies have other quarterly filing dates, but March 15 is the grand dad of them all. Can you claim tax credits year round? Certainly, if you are eligible for geographic, wage based credits. (FEZ/RC) But, that said, retroactivity only extends three years from the open tax year. So, once 2008 returns are filed, we would only be able to look back as far as 2006 for any credits that might have been available in those tax years. If the 2008 return has yet to be filed, we could go back as far as 2005, retroactively.

A year from now, tax credits will change, but it’s still too soon to tell what impact the stimulus package will have on jobs creation. If however, those shovel-ready jobs begin gaining traction, there will be many opportunities to generate credits, as a result of the jobs that will be created. More immediately though, there are two new categories for demographic credits (WOTC) that were born out of the stimulus bill and these WILL make a big difference. These categories are: unemployed veterans and disconnected youth. In general, an employer can earn from $2,400-$9,000 in tax credits for hiring a qualified unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010.

An unemployed veteran is any veteran who is certified as having been discharged from active duty at any time during the 5-year period ending on the hiring date; and being in receipt of unemployment compensation for not less than 4 weeks during the 1-year period ending on the hiring date.

A disconnected youth is any individual who is certified as 16 – 24 years old, not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring.

The bottom line is many businesses have tax credits available, but never claim them. That is why our business is so attractive to both potential clients and franchisees as well. Our tax credit administration process is second to none. While we cannot predict future tax credit trends, we definitely know how to maximize their potential, once we identify them and let our clients know that they are available.

April 15 Knocking; Embrace Your Opportunities

While most of America files its taxes on April 15^th, there are a great many businesses that file their’s on any of three other quarterly dates throughout the year. However, since April 15^th is traditionally seen as our nation’s filing date, it is important for business owners to understand that there is still time to positively impact the outcome of their tax returns for 2008. In fact, there may still be time to actually reclaim taxes paid for years ’07, ’06 and ’05.

Specifically, I’m referencing the “geographic, wage-based employment tax credit program,” just one of several that we administer at RetroTax. Typically, we examine year-end payroll reports for our clients that send employees to work at sites that are located in Federal Empowerment Zones and/or Renewal Communities, nationwide. Using our proprietary mapping programs, along with other resource tools, we determine how many and which of those employees also live in these Zones, thereby creating tax credit opportunities for the employers. We calculate the credits available based upon the qualifying wages paid to these employees and along with all of the appropriate forms required by IRS, send that data and supporting documentation back to the clients and their accountants, for completion on their tax returns. If business owners have unknowingly left credits from prior tax years on the table, they may choose to amend returns from as many as three prior years and reclaim those dollars as well.

So, what if you’re not in one of these geographic zones? Well, don’t despair, as there are still opportunities for you, too. There are also demographic programs that may qualify you for wage-based credits as well, regardless of where the job sites are, or where the employees may live. We can administer those on a quarterly basis too, perhaps reducing the estimated quarterly payments that one would actually need to make, based upon the annualized dollar value of the credits anticipated.

Now comes the big question that every business owner we work with is interested in knowing: How long does it take to secure these tax credits? The answer to that question is very difficult to pin. Let’s break this question down into a couple of bite-sized chunks. First, with reference to demographic credits: while it is true that this is a Federal program, these credits must be certified by the individual states where the employment occurs. Thus, the answer to the question about how soon you will get the credit hinges upon the efficiency of each state’s certifying authority. That varies widely from state-to-state. We do most of the heavy lifting on our end, interacting closely with those that do your hiring, to be certain that each and every opportunity to certify an eligible new hire is realized, but at the end of the day, how soon those credits are actually certified, is a function of the individual states.

As for the geographic credits, they are realized with far more speed and efficiency, as the criteria for their generation is much simpler. Yes or no: “Does the business send the employee to work in a zone?” Yes or no: “Does the employee also reside in the zone?” Once we’ve documented this information from payroll reports provided by the client and mapped the appropriate address information utilizing our proprietary software, it is a function of creating a comprehensive supporting documentation package and providing that to our client, along with the appropriate IRS forms, for inclusion in their tax returns.

It is not too late to benefit from these tax credit programs for 2008. In fact, now is the time to jump on this and see just how much you may be eligible to claim. Remember, until your 2008 tax return is filed, we can actually research and potentially still have a positive impact on prior years ’07, ’06, and ’05 as well.

In any and all cases, what we offer are non-traditional administrative functions that most CPA firms do not provide. We are “SPECIALISTS IN THE ADMINISTRATION OF STATE AND FEDERAL WAGE-BASED TAX CREDIT PROGRAMS.” As such, we work closely with you, your Finance/HR professionals and CPA/accounting professionals to get the mission accomplished. Business owners should think outside the box in this economy. These tax credits provide an often overlooked and unrealized opportunity that many business owners should claim. We will be happy to fill you and your resource team in on the particulars. I’d be happy to hear from you personally at stan.friedman@retrotax.com