With an overwhelming number of tax credits out there, it can be hard to pick the ones your business is eligible for out of the crowd. Whose job is it to find these credits - yours or your accountant’s?
If you’ve read our other articles, you may fully expect us to answer that we’ll do the heavy lifting here for you. After all, a major reason to work with a monthly accounting service is to let an accountant take the bookkeeping and tax work off your plate.
However, even the most perfect accountant we can imagine wouldn’t have a complete success rate in obtaining every tax credit you’re eligible for. You should always keep an ear out for business tax credits just in case. After all, a claimed tax credit is a directly-lowered tax liability.
A quality accountant should, however, have a decent understanding of some of their most-claimed tax credits and know your eligibility. They might not have this same awareness when it comes to the specific or rare ones, but they can still check your eligibility for them if you ask! At CSI Accounting & Payroll, we’ve been helping our clients claim tax credits in this manner for over 50 years.
Here, we discuss the top six credits we believe you should ask your accountant to see if you qualify for.
The following six credits are ones that we believe you should ask your accountant about.
Also commonly referred to as the “Small Business Health Insurance Tax Credit,” this credit is sometimes searched for by employees who want to show their employer there is an incentive to provide them with health insurance.
Most small businesses don’t have health insurance for their employees, so we agree that this is a great incentive! It will pay up to 50 percent of premiums that the employer pays, good for up to two consecutive years. However, we believe that many companies that qualify for this credit probably miss out on it.
You may be eligible for this credit if:
To claim this credit, you need to fill out Form 8941. It goes on a corporate return and flows through a personal form.
Also known as the 45(B) credit or the Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, it’s only used for food or beverage employers where tipping is customary.
This credit will generally equal the amount of Social Security and Medicare taxes that had to be paid by the employer on the employees’ tips, but it’s only applied to tips that exceed the January 1, 2007 federal minimum wage of $5.15 per hour.
You may be eligible for this credit if:
To claim this credit, you need to fill out Form 8846 if you’re a partnership or S-Corporation. If you are neither, you can report the credit on Form 3800.
This is a major payroll credit! This goes to employers who hire workers from 10 certain targeted groups, and the maximum tax credit usually comes out to $2,400 (depending on the category of workers hired and the hours worked and wages paid in the first year.)
You may be eligible for this credit if:
To claim this credit, you need to fill out Form 8850 with the job applicant on or before the date that the applicant receives an employment offer. Additional forms may be required.
The ERC is a COVID-19 relief effort that many eligible small businesses aren’t applying for simply because they aren’t aware of their eligibility. While there are many variables that go into this, you can be eligible for up to $26,000 per eligible employee. Don’t miss out on this limited-time credit!
A big misconception is that if you got the PPP loans, you can’t get the ERC. This isn’t necessarily true. Business owners who received PPP loans and had them forgiven can also get the ERC, but the money that was used in the PPP loan forgiveness can’t also be applied to claiming the ERC.
Read all about ERC eligibility requirements and the claim process here.
Ready for the next step? Learn about our ERC services and talk to us about your eligibility here.
You can also get a credit to help you offer your employees certain retirement plans (including SEP, SIMPLE IRA, or other plans like 401(k)) by offsetting startup costs (that cannot also be deducted), which can be a barrier to many small businesses. This credit can be up to $5,000 for three years.
You may be eligible for this credit if:
You may also choose to auto-enroll in the plan to claim a credit of $500 for three years.
This is also known as the Credit for Increasing Research Activities, which is yet another credit that many small business owners don’t know they’re likely eligible for. The credit can be up to $250,000 to offset the portion of Social Security paid by you, the employer.
You may be eligible for this credit if:
To claim this credit, you need to fill out Form 6765 if you’re a partnership or S-Corporation. If you are neither, you can report the credit on Form 3800.
Before you ask why your accountant isn’t talking to you about these tax credits, keep in mind that accountants can’t possibly have every credit (and its eligibility) memorized. A quality accountant will still do a great job without your guidance, but it can’t hurt to ask them to determine your eligibility for credits that you’ve learned a little bit about, too! Now you’ll be able to ask about the six credits mentioned in this article.
If you’d like to talk with CSI Accounting & Payroll about if we can be a good fit for tax credits and beyond, click the button below for a free consultation.
Not sure if you’re ready to talk? That’s okay! You can learn more about who is a good fit to work with CSI first.