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!

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!

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/

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

Business Owners Still Have the Opportunity to Impact their Bottom Lines for 2008

As I have said before, RetroTax will do well in good times, but will also thrive in a down economy. The reason? We help businesses benefit from tax credits that in most cases, were completely unknown to its principals. When we approach potential clients, small or large, be they large businesses or or franchise concepts or units, the initial reaction to what we proffer, is incredulity. More times than not, CEOs, CFOs, and SVPs as well as entrepreneurs and unit operators respond with, “You’re kidding, right?” Once we educate them on how to capitalize on these credits and they begin to understand just how easy it is for them and/or their franchisees to benefit from these credits, it becomes a “no-brainer.”

Anyone who employs people should be taking full advantage of these wage-based tax credits to optimize their financial picture, no matter where their business is located. But, for those fortunate enough to be located in one of those geographic zones that the government has designated as a Federal Empowerment Zone or Renewal Community, well they shouldn’t just stop at ’08. What about ’07, ’06, and ’05? That you see, is why we call ourselves RetroTax. Everything we do starts with a look back. In fact, in these aforementioned geographic zones, qualified clients can amend returns from the past three years and actually reclaim taxes that they have overpaid, for not claiming eligible credits for those tax years in real time.

What we do is turn back the clock for them and revisit those three previous years from the current open tax year and assist them with recapturing as much as $3,000 per year, per qualified employee on their payroll. Better still, in many cases, these credits pass through to the owners of the business as PERSONAL tax credits, offsetting their PERSONAL tax liabilities, with carry forward opportunities that last for 20 years. So, plainly stated, unless, and until, our client’s 2008 taxes are filed, we can go all the way back to 2005 and recapture past opportunities to benefit from these credits. In tough times like these , what a difference that can make for the owner of a small or medium enterprise.

While April 15 is tax day for most of us, there are many businesses that file on one of the other quarterly deadline dates throughout the year. So, if a client files ’08 return s on April 15th, opportunities to recapture credits for 2005 are forever gone, once that '08 return is filed on April 15^th. But for a company that files their '08 return in August or on October 15, recapturing taxes that were paid for as far back as 2005 still remains an option, until that ’08 return is filed. The long and short of it is this; once '08 is filed, '05 goes off the table with it and then 2006 is as far back as we can reach on a retroactive basis.

In a nutshell, many companies, including small business owners, have tax credits that go unclaimed. I encourage you to reach out to us, or one of our franchisees and learn more about how to avail yourself of these opportunities. Or, simply visit us online at www.retrotax.com.

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.