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Spring is a time of year that correlates with many things: new beginnings, warmer temperatures, basketball tournaments, allergies and, of course, taxes. If you’re like many Americans, you’re trying to set aside time to take care of your tax filing before the April 15 deadline. But for businesses, tax season can be a year-round occurrence, as there are multiple filing deadlines that have to be complied with.
Because of their complex nature, taxes are often a pain point for many businesses. However, with proper planning that includes tax strategies, businesses can minimize their tax liability and maximize their return on investment.
There are numerous business tax credits and incentives available at the federal, state and local levels, but many businesses don’t capitalize on available credits because they aren’t aware of them or they simply don't have time to navigate through the qualifying factors.
Although, incorporating tax credits into your tax strategy may seem overwhelming, it doesn't have to be with the right tax advisor and proper planning. Below, we have outlined some of the available tax credits and a few tips for ways you can research and apply for business tax credits:
Be Curious and Stay Informed
Before you can understand your tax credit eligibility, you need to know the options out there. A simple web search can accomplish this task, as the Internal Revenue Service (IRS) and your state’s department of revenue provide a list of available credits on their websites. These lists will include more information about eligibility requirements, filing deadlines, the forms needed to apply, etc. Tax credit options vary depending on a variety of factors, such as business size, industry, location, entity structure and more, but here are several common types of tax credits:
Investment credits
Employment credits
Sales/use tax refunds
Contractor tax refunds
Property tax abatements
Forgivable loans or low-interest loans
Job training funds
Clean energy tax credits
Research and development (R&D) credits
It’s also important to stay current on the latest tax legislation that may impact your business. Tax laws are constantly changing, and with new laws can come new credit opportunities or credit expirations, in which case you need to be able to adjust your tax plan accordingly.
Routinely Review Business Plans
Most tax credits can’t be retroactively applied, so they require planning ahead. To help qualify for tax credits, you need to regularly review your business plans and determine where credit opportunities may align. When our team discusses tax credit eligibility with clients, we use the following guiding questions to help determine whether credit opportunities may be available:
Do you have capital expenditures planned over the next two to three years? Are you planning any new equipment purchases? Are you considering new building renovations or expansions?
What are your hiring plans or forecasts over the next two to three years?
Do you have locations in other states? What are your capital expenditures and hiring plans for those locations?
Do you have any training planned for new or existing employees?
Does your company do research and development (R&D)? If so, what are your plans related to R&D work over the next two to three years?
If any of the above questions apply to your business, there may be tax incentives on the table to help fund future projects and further help your business achieve its goals. If the questions don’t apply, consider using your next strategy planning session to decide if any of these projects may make sense for your business down the road.
Consult With Your Tax Advisor
With all the variability surrounding tax credits and incentives, it can be challenging to know what next steps your business should take. You may want to consider working with a tax advisor who can evaluate your business’s structure and future plans and provide clarity on which incentives you qualify for. Collaborating with a tax advisor can take the guesswork out of applying for various credits and hoping one sticks. Instead, you can feel confident that your advisor is helping you maximize the eligible tax credits available to your business.
Rx Advisors (a division of Fleming Advisors, LLC) helps independently owned pharmacy's identify tax saving opportunities as one of our service offerings. We’ll help you optimize your tax planning strategy and perform the tax compliance work so that you can focus on improving your business and quality of life. View our case studies to see the impact on businesses that we have helped leverage tax credits and strategies for.
If you’re interested in utilizing tax credits as part of your business’s tax strategy, we’d be happy to assist you. Let's connect today so that we can learn more about how we can benefit your business.