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.

Administration of Tax Credits Takes Time; How RetroTax Makes It Easier

When I am asked, “how much time and energy goes into administering a tax credit?” I return that question with this one: “How much time goes into closing a mortgage loan?” Of course, in either case, the answer depends on who is doing the work. Even for those that sell a house on their own, minus the help of a professional realtor, who knows of anyone that actually gets a mortgage loan closed the same way? Answer… NONE! The reason is that even if you do navigate your way through the real estate process and transaction alone, virtually NOBODY closes the loan by themselves, without the help of professionals. Same can be said for the process of administering tax credits and incentives. It is onerous. The good news though, is that when you retain us to do the heavy lifting, WE do the work, and YOU get the credit.

The timeline from when we are retained, until the time when credits are redeemed, depends on whether we are administering demographic or geographic credits. The process and client involvement is a bit different too, depending upon which types of credits we are administering.

Today’s economic climate has definitely created something of a “stimulus” for us as a business model. What we do makes sense in ANY economy, but it becomes far more compelling in times like these. With so many business owners struggling to make ends meet and wrestling with issues like tightening credit to keep their boats afloat, payroll can become something of a challenge. In reality, sometimes the credits that we administer, can make the difference between keeping, vs. laying off personnel.

As our business continues to grow, perhaps RetroTax itself is providing a stimulus for the economy. From my vantage point it’s really impossible though to know how the money that we save a company is allocated. Is it saved, or is it spent? I just don’t know. What I DO know is that because of us, many business owners at least have the option of deciding that for themselves, as opposed to scrambling to make ends meet. They have the choice. They have options… and options, like credits are GOOD things!

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.

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/