5 Obscure Business Tax Credits (And How Not to Miss Out On Others)
Though Tax Day has officially come and gone, 12 million people filed extensions and are still in the thick of sorting out their finances. One crucial benefit for those with extensions is the ability to check and double-check ways that they can reduce their tax bills.
The world of tax credits is a murky, ever-changing space of discounts for individual taxpayers and businesses alike. If you can maneuver the (intentionally) tricky language of credits applicable to your company, you’ll discover what tax credits can help you keep more money in the company account. Whether you just filed a tax extension or are simply reading up on the subject, this post will introduce you to five business tax credits and discuss how a tax credit solution can help your business better procure incentives.
Understanding the World of Tax Credits
For those in need of a refresher, a tax credit offers a dollar-for-dollar reduction on the entire amount of money your business owes to the state and federal governments. A tax reduction, on the other hand, lowers your taxable income and is calculated using the percentage of your tax bracket. And while both can lower your yearly tax payments, they’re of no help unless you know which credits and deductions are applicable to your business.
By far the most difficult part of procuring tax credits is trying to find them – no one has time to spend hours searching the web for tax credit lists that may or may not be relevant. Even more confusing is the endless cycle of changes: tax credits are constantly expiring, being renewed or being revised to fit new guidelines. It’s nearly impossible to keep a handle on the goings-on of credits at both the state and federal levels.
5 State Credits Your Business May Not Know About
To prove just how tricky the government can be when it comes to tax credits, we’ve rounded up five lesser-known credits that could be saving your company thousands annually.
1. Georgia Job Tax Credit
Savings: Up to $4,000 annually per job for a maximum of 5 years
What It Is: This credit for businesses based in the Peach State aims to reward job creation in sectors such as manufacturing, telecommunications and research and development. Company tax savings are based on two key factors: the number of new jobs created and their locations.
2. Federal Empowerment Zone Credit
Savings: Up to $3,000 per eligible employee
What It Is: Businesses located in an Empowerment Zone (EZ) that employ individuals who live in the EZ can receive a wage credit for those employees, whether those employees work part time or full time. This credit can be renewed on a yearly basis, and the credit amount equates to 20 percent of the first $15,000 of paid wages (for each employee).
3. Georgia Retraining Tax Credit
Savings: Up to $1,250 per employee per year
What It Is: The Georgia Retraining Tax Credit allows your business to neutralize the cost of retraining employees. A company can earn up to a $500 credit per full-time employee for each training program (with an annual maximum of $1,250 per employee). The credit covers eligible expenses such as instructors and training materials, travel expenses and employee wages during training.
4. California Enterprise Zone-Hiring Credit
Savings: Up to $37,440 per employee over a period of 5 years
What It Is: Businesses located within designated Enterprise Zones are eligible to receive significant credits for hiring individuals who meet certain qualifications under California’s Enterprise Zone-Hiring Tax Credit.
5. California Competes Credit
What It Is: This income tax credit rewards businesses who add or move jobs to California, and is administered by the governor’s Office of Business and Economic Development in an attempt to woo companies drawn to the low tax levels of other states. Eligibility and incentives are determined on a case-by-case basis with respect to a number of factors such as number of jobs, employee wages and opportunity for future growth.
Keep in mind: This is just a very small sample of the long list of business tax credits unknown to the vast majority of taxpayers. So how can you be assured that you’re applying for any and all credits your business might be eligible for?
Track Your Credit Opportunities with ADP SmartCompliance
Investing in a solution that can monitor tax credits and ensure your business applies for all qualifying reductions will save you countless hours. Rather than manually perusing search engines and financial websites, you’re able to input your business details and the software does the work for you.
ADP SmartCompliance is one such tool, with a tax credits module that enlists a team of tax credit experts dedicated to making sure your company takes advantage of all eligible incentives. Your team of specialists will not only help you identify all applicable tax credits within their database of 3,000 incentives, but ensure you collect and retain those credits.
In addition to a tax credits module, ADP SmartCompliance also provides other applications to help you meet ACA compliance and employment tax compliance, improve W2 management and mitigate unemployment claims. SmartCompliance also offers seamless integration with many leading payroll, HR and financial software programs, including Oracle, SAP, Kronos and Microsoft Dynamics.
Interested in comparing all of ADP SmartCompliance’s key features? Download our free Top 10 Business Tax Software report for a complete view of SmartCompliance, and to compare the ADP solution to other leading business tax platforms.