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Tax Credits
What is a tax credit?
Why should I participate in tax credits and incentive programs?
How are the credits distributed?
What if I am not paying taxes or only paying Alternative Minimum Tax (AMT)?
Do I forfeit deductions by taking credits?
Are these credits hard to implement?
Do credits apply to my current employees?
Do I have to change my current hiring practices?
How much work will this create for my company?
Do you offer reporting services to keep me informed of this progress?
Can we do this in-house?
Why can't my CPA do this for me?
Will I be audited more frequently?
How much will this cost?
Will this create a lot of paperwork for our Human Resources (HR) Department?
Should I be concerned about Discrimination as it relates to the questions asked?
Why choose TaxBreak?
What measures does TaxBreak employ to provide computer security?
Q. What is a tax credit?
A. A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed.
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Q. Why should you participate in tax credits and incentive programs?
A. There are billions of dollars allocated in federal and state corporate tax credits and incentives programs. They are designated to attract new business and retain existing ones. Businesses are encouraged to apply for these programs to help offset liabilities and promote growth. These programs serve as an extension of endorsing your commitment to your community.
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Q. How are the credits distributed?
A. If the business entity is a sole proprietorship, S-Corp, LLC, LLP or Partnership, the credit passes to the owner, shareholder, member or partner in the same manner as losses are allocated. In a C-Corp the credits are used by the corporation.
They offset federal income taxes and can be carried back to the prior year or carried forward 20 years.
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Q. What if I am not paying taxes or only paying Alternative Minimum Tax (AMT)?
A. No problem. The WOTC will offset the AMT and the EZ and RC credits will offset 25% of the AMT. If you are in a Net Operating Loss (NOL) and not paying taxes, the credit may be carried forward 20 years.
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Q. Do I forfeit my deductions by taking credits?
A. Yes. You lose the deduction for wages in the amount of the credit, but you are trading out a credit for a deduction which is much larger. For example; Employee makes $4,000 which generates a $1,600 credit, Employer takes a $2,400 wage deduction along with the $1,600 credit.
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Q. Are these credits hard to implement?
A. At TaxBreak, we have an online or manual process to meet your needs. We provide training and customized forms for each location. Implementation on a multi-location business can be conducted within 48 hours. It takes approximately 2 to 3 minutes per new hire.
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Q. Do credits apply to my current employees?
A. Most federal credits are for new hires only. They may be retroactive. We would identify those instances on a case-by-case basis.
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Q. Do I have to change my current hiring practices?
A. We have found that most companies' new hourly hires are hire-eligible candidates for credits. But, by using our Quick Check form, you can pre-screen applicants for credits.
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Q. How much work will this create for my company?
A. You provide us with:
- Point of hire location information
- Wage and hour data
- Supplemental documentation
We will:
- Identify your options
- Track law and regulations
- Submit agency forms
- Track responses and/or certifications
- Calculate credit, summarize & report
- Apply credit to appropriate tax filing
- Maintain records
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Q. Do you offer reporting services to keep me informed of this progress?
A. We provide monthly credit reports to offset quarterly estimated federal income tax payments and forms to include with your year end returns.
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Q. Can we do this in-house?
A. Most companies do not take advantage of these tax credits and incentive programs because most companies do not have the in-house resources to manage the process. Some of the complexities associated with administrative process are keeping up-to-date on all state rules, regulations, deadlines, paper process and, if you operate in multiple states, each has different sets of procedures.
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Q. Why can’t my CPA do this for me?
A. We work with CPAs. Many accounting people are focused on running their business and dealing with compliance issues. They recognize that this is more of an operational service that can not be done at year end because of the 28 day filling period.
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Q. Will I be audited more frequently?
A. We minimize any potential exposure and still allow your firm to take full advantage of tax credits. We have never incurred a credit loss as a result of an audit nor have we experienced more frequent auditing of our client accounts. Once credits are certified, the government cannot uncertify them retroactively. The government established these tax credits in an effort to provide incentives to businesses to employ from disadvantaged groups and take associated credits. The largest employers in the U.S. take advantage of tax credits. These household names would not take the risk of exposing themselves.
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Q. How much will this cost?
A. It does not cost you a dime to get started. We work on a contingency fee basis and are paid a percentage of the saving we recover for you. Therefore, the fees for obtaining tax credits are paid only from the employer’s tax savings or incentives obtained. There is virtually no financial risk to the employer. In addition, our fees are tax deductible.
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Q. Will this create a lot of paper work for our Human Resources (HR) Department?
A. We take the burden of processing, tracking regulations and identifying the credits. It takes less than 2 minutes to prescreen each new hire and there is a potential savings of approximately $15,000 per 100 new hires. Your Human Resources Department gives you a $15,000 return for 3.33 hours of work. Where else does your company get a similar return?
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Q. Should I be concerned about Discrimination as it relates to the questions asked?
A. These programs were established by the federal and state agencies for companies to take full advantage of qualified candidates and to encourage them to hire from the targeted groups. The government was careful to design a program in a manner that does not discriminate based on any EEO classifications. That’s why so many companies today are realizing millions of dollars in tax credits. The forms are also designed as a pre-screen and, therefore, can be used in assessing which job applicant to hire.
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Q. Why choose TaxBreak?
A. TaxBreak was established to provide tax credit and incentive needs to businesses. Our experience and expertise, coupled with our technology, enable us to provide clients with unparalleled service. Our processing:
- Identifies, applies for, processes and administers business tax credit incentives
- Provides clients dollar-for-dollar credits against tax liabilities
- Ensures federal and state government compliance
- Seamlessly integrates with HR and /or payroll functions
- Makes federal and state employment credits profitable for clients
- Reduces cost and risk to clients since no expense is incurred unless credits and/or incentives are actually certified
- Leverages technology with client business practices to make it simple and easy to implement service
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Q. What measures does TaxBreak employ to provide computer security?
A. The Internet provides enormous opportunities for sharing and dissemination of information. Unfortunately, it also provides significant risks for theft and corruption of sensitive information. At TaxBreak, we use a combination of measures: firewalls, virus/spyware detection and access control measures to help eliminate most security threats. Finally, we use 256 bit SSL certificates from GeoTrust to authenticate access to our FTP server and our non-public websites. This ensures secure SSL file and data transfers over a secure connection via ftps or https connections.
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Still have questions? Our Customer Service Representative will gladly respond to your questions at info@taxbreakllc.com
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