I speak to dozens of business owners every month. This week I asked a couple who work in tax if they had any tips for other business owners this year.
Here are two that are so good I needed to share them with you. Recall these are tax credits (not deductions), so they directly reduce taxes owed. It is money put back in your pocket!
- Families First Coronavirus Response Act (FFCRA)
Ranjit Makhija of Makhija CPA recommended business owners consider the tax credits available under the FFCRA. The FFCRA provides businesses and tax-exempt organizations with fewer than 500 employees, credits to cover certain costs of providing employees with required paid sick leave and expanded family and medical leave for reasons related to COVID-19, from April 1, 2020, through December 31, 2020 (which has now been extended to March 31, 2021).
These credits are claimed through the 941 (Employers Quarterly Federal Tax Return) and usually processed through your payroll provider. Contact your payroll provider about where to report Covid Sick Pay, so this information is included in your 941. For more information, read the “COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs.” Or, if you are in Texas, you can contact Ranjit directly.
- Research and Experimentation Tax Credit (also known as the R&D Tax Credit).
This tax credit was introduced as a two-year incentive in 1981 but has been continually renewed and finally made permanent in 2015. Technology companies have commonly used this credit, but Mark Jaikes of Jaikes Advisory Group let me know this week that it can also be used for manufacturing, food and beverages, professional services, construction, and engineering. Plus, the tax regulations allow eligible taxpayers to “look back” 3 years for credits that were never claimed. If you do design work or create products/services in your business, and are not currently using the R&D tax credit, contact Mark to determine your eligibility.
Either of these tax credits can provide you with thousands (to hundreds of thousands) of dollars in credits to reinvest and grow your business. Ignore them at your own risk.
Trust this is a positive “kick start” to 2021.
Blessings and Happy New Year!
I AM SEEKING 10 BUSINESS OWNERS WHO ARE TIRED OF PRETENDING EVERYTHING IS “FINE”