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WOTC Tax Credits

Top 5 Job Categories for Veterans

Once their years of service are over, many veterans are still young enough to enter the workforce, and start a second career. But figuring out what that second career is can be tough.

Here are five jobs categories that have plenty of opportunities for veterans

Operations Manager

According to the site GI Jobs, Military Friendly Employers are looking for managers all over the country. Job titles that fall into this category include Business Manager, Facilities Manager, General Manager, Plant Superintendent, Production Manager, and Store Manager.

Operations Managers tend to coordinate between departments to make sure production goes smoothly.

Average Pay, Industry Growth & Education Requirements for an Operations Manager

GI Jobs says the median annual salary for an Operations Manager is $100,410.

The Bureau of Labor Statistics projects job growth of 5 to 9 percent through 2026.

You’ll likely need a college degree for this job, but you may also qualify if you have equivalent operational and leadership experience in the military.

Customer Service Representative

GI Jobs ranks Customer Service Representative as the second hottest job for veterans.

Customer Service Representatives answer phones, reply to calls and emails or respond to customers online.

Common customer service job titles include Sales Facilitator, Account Representative, Member Services Representative, and Customer Care Representative.

Average Pay, Industry Growth & Education Requirements for a Customer Service Representative

Truthfully, the pay for a Customer Service Representative isn’t great. The median pay is $32,890 annually.

But the industry is hot. The Bureau of Labor Statistics believes there will be a 5 percent job growth through 2026. And skilled Customer Service Representatives tend to move up the ladder quickly.

Plus, the average education requirement for a Customer Service Representative is a high school diploma, something you already had when you enlisted in the military.

Computer Information Systems Manager

GI Jobs says Computer Information Systems Managers help manage a company’s computer systems. When you’re looking for a job in this field, look for job titles like Information Technology (IT) Manager, Technical Services Manager, Information Systems Director, IT Director, and Chief Technology Officer.

Average Pay, Industry Growth & Education Requirements for a Computer Information Systems Manager

According to the job search engine Monster, the average IT Program Manager earns $96,300 annually.

The industry is growing. The Bureau of Labor Statistics thinks the IT field will grow by 10 to 14 percent through 2026, that’s more than most fields.

Most IT managers will need a bachelor’s degree in computer or information science and experience.

However, there are ways to get your degree online before you even leave the military. Clearance Jobs has a list of great colleges that offer online degrees in the STEM (Science, Technology, Engineering, and Math) fields including San Francisco State University, University of New Haven, and Florida International University.

Accountant/Auditor

This one falls into the finance field, so you’ll want to be strong in math or at least love it. Accountants and auditors track the money and analyze the financial records of organizations.

Job titles include Accountant, Auditor, Business Analyst, Certified Public Accountant (CPA), Financial Analyst, and Budget Analyst.

Average Pay, Industry Growth & Education Requirements for an Accountant/Auditor

GI Jobs says the median annual salary of an Accountant/Auditor is $69,350 and it’s a growing industry. The Bureau of Labor Statistics predicts a 10 percent job growth in the industry through 2026.

You do need a four-year college degree to take on a job like this. If you’re looking to become a CPA, there’s more work required because there are certification requirements that vary from state to state.

The good news is, once you get your degree many accounting firms will allow you to work full-time while you work toward your CPA and help train you along the way.

Computer Systems Analyst

This one is similar to the Computer Information Systems Manager in that it works with a company’s IT systems. A Computer Information Systems Manager is constantly looking for ways to improve the computer systems within an organization and make things run more efficiently.

Job titles in this field include Computer Analyst, Business Systems Analyst, Applications Analyst, Systems Engineer, Information Systems Analyst, and Computer Systems Consultant.

Average Pay, Industry Growth & Education Requirements for a Computer Systems Analyst

GI Jobs claims the median annual salary for a Computer Systems Analyst is $88,270.

The Bureau of Labor Statistics believes the industry will grow by 9 percent through 2026.

To get a job as a Computer Systems Analyst you’ll need a four-year degree in computer or information science. Some skills that you acquired while in the military may translate over to a job in this field and may count in place of some of the prerequisites in college so be sure to ask.

Companies Hiring Veterans

Several companies make it a point to hire veterans.

According to Glassdoor, Walgreens, Booz Allen Hamilton, Power Home Remodeling, The Home Depot, and the U.S. Department of Veterans Affairs are all known for hiring veterans.

The site Military Benefits says American Corporate Partners teams up with major corporations to hire veterans. Among its affiliates, Pepsi, Coca-Cola, Lockheed Martin, Johnson & Johnson, and UPS.

Why 2019 is the Year to Harness the Sun

There are plenty of tax credits out there for businesses, but if there’s one that you want to take advantage of in 2019, it’s the Solar Investment Tax Credit (ITC). That’s because the credit is at its peak this year and in 2020 it’s going to drop.

What is the Solar Investment Tax Credit?

In 2006, the federal government enacted the tax credit to help businesses and residents switch to solar power.

It allows for a 30 percent tax credit for the installation of solar in a residence or business. The rule is that you must “commence construction” before December 31, 2019, to be eligible for the full 30 percent tax credit.

The Solar Investment Tax Credit is Phasing Out

After this year, the tax credit will slowly phase out.

It will step down to 26 percent in 2020 for both commercial and residential.

In 2021, it will step down to 22 percent for both commercial and residential.

In 2022, the residential credit completely disappears and the commercial credit drops down to 10 percent permanently.

All of this bars an act of Congress, but at this time it looks like this is how things are going to go.

How Do I Qualify for the Solar Investment Tax Credit?

To claim the Solar ITC, you must install the photovoltaic (PV) solar panels. The U.S. Office of Energy Efficiency & Renewable Energy says, “When the sun shines onto a solar [PV] panel, photons from the sunlight are absorbed by the cells in the panel, which creates an electric field across the layers and causes electricity to flow.”

What Qualifies for the Solar Investment Tax Credit?

The Solar ITC doesn’t just cover 30 percent of the cost of the solar panels but also covers 30 percent of the work needed to get the panels installed and 30 percent of the installment of the energy storage systems that accompany the panels.

Most solar providers can give you details on what is and is not covered under the Solar ITC.

Do I Have to Use a Specific Contractor to Qualify for the Solar Investment Tax Credit?

No. Unlike some programs, the federal government does not have specific contractors that it requires you to use to qualify for the tax credit. It’s in your best interest to find a reputable contractor that will offer a competitive price, but that’s just good business practice, not something the federal government requires.

Will I Still Receive the Solar Investment Tax Credit if I Lease the Solar Panels?

No. The person who pays for the solar panels is the one that gets the credit. If you’re leasing from the solar company or even leasing to own, it’s the solar company that will receive the tax credit.

If you’re leasing to own, it may be in your best interest to shop around for a solar company that will work the tax credit into the cost of the installation so that the 30 percent credit goes toward paying off the cost of the installation.

State Solar Benefits

That 30 percent tax credit is just what the federal government offers, many states in the U.S. offer their own tax credits and incentives for businesses to add solar power.

The Dsire USA website has a list broken down by state here.

Is the Solar Investment Tax Credit Worth It?

Of course, there’s no reason to install solar panels if you don’t end up saving money in the end.

According to the site Energy Sage, there’s a large initial outlay of cash for solar installation but anywhere between 5 and 10 years after the investment, you should hit a breakeven point.

How much you pay out initially is dependent on how large of a building you’re putting solar panels on. While the breakeven point will depend on the roof size, amount of shade on that roof, and the initial outlay of cash.

To determine if the Solar ITC is worth it for your business, it’s important to take all factors into account. Think about how much money you’ll have to pay upfront and how long it will take to recoup that investment. You also want to look at how much you stand to save every year in electricity costs.

Increased Appraisal Value

You should also look at possible long term benefits. According to a study published in the Appraisal Institute’s Magazine, the addition of solar panels increased the value of homes across six states.

It stands to reason that solar panels could also increase the value of your commercial property.

As always, the advice in this post is a general overview and cannot be considered advice specifically for your business. It’s important that before you take any steps, you consult your accountant or contact us here at the Tax Credit Group. We’re always happy to answer any questions you may have.

If you’re looking for other ways to help the environment, be sure to check out our post Ways to Go Green and Save Your Business Money.

And if your company spends a lot of money every year on transportation, it might be a good idea to look at our post on Alternative Motor Vehicle Tax Credits.

The Indian Employment Tax Credit

Employers who hire Native American Indians are well advised to look into whether they qualify for the Indian Employment Tax Credit (IEC). As with other tax credits, qualified employers may receive a certain monetary incentive when they file their annual taxes.

What Exactly is the Indian Employment Credit?

The IEC is a monetary incentive provided in the form of a tax credit. It was first created and introduced in 1993. It is offered by the United States federal government to employers that hire employees who are registered Native Americans (referred to as “American Indians” or “Native American Indians” in IRS documentation). The credit provides a dollar-for-dollar reduction in the employer’s business taxable income.

Like many other tax credits, it was designed to incentivize employers to hire certain workers. These workers traditionally face barriers to employment. Credits create a win-win situation for both employees and employers. Employers who may consider hiring certain groups they have not considered before.  For employees, who may have an easier time finding work.

How Much is the IEC Worth?

The amount of the Indian employment credit is equal to 20% of the excess (if any) of:

  • The sum of qualified wages paid during the taxable year and the sum of qualified employee health insurance costs paid during the taxable year
  • The sum of qualified wages and qualified employee health insurance costs that were paid by the employer during the calendar year

It is important to note that for the purposes of this credit, qualified wages are all wages paid to a qualified employee, except for who also qualify for the Work Opportunity Tax Credit, which is reported using IRS Form 5884.

Who Qualifies for the IEC?

In order to qualify for this tax credit, the employee must:

  • Be either themselves a registered Native American or the spouse of a registered Native American (be an enrolled member of an Indian tribe). The term “Indian tribe” may include:
    • Any Indian tribe, band, nation, pueblo, or other organized community or group, including Alaska Native villages
  • Live on or near a Native American reservation while performing the services of their job
  • Complete all services for an employer within that reservation

Certain employees are not eligible. The term “qualified employee” does not include:

  • Individuals who receive wages in excess of $40,000
  • Those whose wages from the company do not meet certain thresholds that are specified by the IRS
  • Any employee who is a 5% owner of the company
  • Those whose work is related to certain gaming activities:
    • Services which involve the conduct of Class I, II, or III gaming as defined in section 4 of the Indian Gaming Regulatory Act
    • Services that are performed in a building that houses such gaming activity

How Do I File for This Tax Credit?

Although the IEC has the one name, it is reported differently, depending on the employer’s business structure:

  • S Corporations and Partnerships must use IRS form 8845
  • Employers that are trusts or estates report the credit on either form 8845 or form 3800, the General Business Credit, if the source credit comes from a beneficiary
  • Other types of businesses report using IRS form 3800

Anything Else I Need to Know?

It is important to understand that the Indian Employment Credit initially expired on December 31, 2007. However, it has been extended several times through acts of Congress. Currently, the IEC is indeed in effect as of 2018. If you are unsure whether the credit is expired, you can check on the IRS’s page for commonly used items which may be expired. This page is regularly updated, especially as the tax season approaches each year.

If you’re unsure whether you qualify for the Indian Employment Tax Credit, give the Tax Credit Group a call. We can help you determine your eligibility.

The New York Minimum Wage Tax Credit

New York offers millions of dollars’ worth of tax incentives every year for employers. If your business is in this state, the good news is you may qualify for more than one tax credit that may each add up to thousands. These credits not only aim to boost investment in New York businesses, they also help people who traditionally face employment barriers find work.

A large group of these people are young, low-income earners. The state of New York offers a Minimum Wage Reimbursement Credit that rewards employers who hire young students at minimum wage. Students may be disadvantaged and at-risk as they join the workforce. Sometimes, as they attempt to find employment, they become discouraged due to their lower skillset and inability to commit to full-time work year-round.

Who Qualifies for This Credit?

Employers are eligible to receive this credit if they employ students in New York State. These student workers must:

  • Have been employed beginning on/after January 1st, 2014 and before January 1, 2019
  • Be at least 16 but not yet 20 years of age
  • Be paid at the New York state’s minimum wage During the qualifying period of time, this minimum wage started at less than $9.70 and increased to $11.10 ($10.50 minimum to $13.50 minimum for New York City)
  • Be a student during their period of employment and be able to prove their student status

How Much is the Credit?

In order to calculate how much the credit will be worth for you, you’ll apply a certain tax credit multiplier to the total number of hours worked within the taxable year for which the student worker is paid New York’s minimum wage. The tax multipliers vary based on the year and are as follows:

  • $0.75 for each hour for tax years beginning on/after January 1st, 2014 and before January 1st, 2015
  • $1.31 for each hour for tax years beginning on/after January 1st, 2015, and before January 1st, 2016
  • $1.35 for each hour for tax years beginning on/after January 1st, 2016, and before January 1st, 2019

For example, if you hired a student employee who worked 20 hours a week for 20 weeks in 2019, they’ll have worked a total of 400 hours. This entitles you to a credit of $540.

How Do I Verify My Employees’ Student Status?

In order to prove that you did indeed hire employees who may be eligible for the minimum wage reimbursement, you must verify that the individual was enrolled at an eligible educational institution. You need to retain documentation from the student and keep it in your records so it’s available upon request. Acceptable forms of documentation include:

  • A student ID
  • Current or future course schedules that are officially issued by the school (transcripts)
  • A letter from their school verifying their future or current enrollment
  • Working papers: New York State Department of Labor Student General Employment Certificate-AT-19

What is an Eligible Educational Institution?

These institutions are ones that maintain a consistent curriculum and faculty. They also contain a body of students that is regularly enrolled and in attendance at the location where educational activities are regularly conducted. Examples include:

  • Universities
  • Colleges
  • Secondary schools
  • Vocational, technical, and trade schools
  • Any institution that offers programs of training or education that are meant to prepare students for gainful employment

Institutions that are not eligible include:

  • On-the-job training courses
  • Schools whose courses are only available online
  • Correspondence schools

When able to verify that young employees are indeed students and they are paid the minimum wage, employers can be rewarded. On the other end, young students may find an easier path to employment if companies are incentivized to hire them.

If your business is in New York, exploring the minimum wage tax incentive can improve your company’s financial outlook. The Tax Credit Group can help you find the most current credits available in your state—and help you determine whether your employees qualify for this reimbursement.

What’s the Difference Between a Tax Credit Specialist and a Certified Public Accountant (CPA)?

We here at the Tax Credit Group are tax credit specialists, but we always get a lot of questions about personal and corporate taxes and accounting. It’s understandable. For many people, the words tax and accountants are synonymous and so it’s easy to think that we can specialize in taxes and CPAs specialize in tax credits. But that’s not the case.

What’s a Certified Public Accountant (CPA)?

According to Investopedia, the CPA designation is given to people who are certified by the American Institute of Certified Public Accountants (AICPA). They have met the education and experience requirements set forward by AICPA and have passed an exam.

A CPA has at least a bachelor’s degree, has completed 150 hours of education and has completed at least two years of public accounting experience. He or she has also passed a certification exam and must complete several continuing hours of education every year to maintain his or her certification.

But the key here is that’s what has to happen before a CPA even starts specializing in a field. Even among CPAs, there is a difference. Some of them specialize in audits, making sure a company’s books are in order and there’s no fraud. Some specialize in personal taxes, making sure that people submit the right paperwork to the IRS. Still, others specialize in non-profits, making sure that those non-profits meet the rigid requirements of the state and federal government.

How is a Tax Credit Specialist different?

A tax credit specialist does not have to be a CPA, but it can certainly help.

In most cases, a CPA will likely have a general understanding of the tax code, but he or she may not be specialized in the particular tax code you’re dealing with. And it’s not the fault of the CPA. The tax code is immense. So big in fact, that no one can quite figure out how many pages it is.

To give you an idea, there’s a book called Federal Income Tax: Code and Regulations–Selected Sections (2018-2019) on Amazon that totals 1,776 pages. Mind you, that’s just selected sections.

A tax credit specialist understands the ins and outs of very specific parts of the tax code. This person will understand the nuances of the tax code and know when to push the envelope and when to be cautious.

CPAs and Tax Credit Specialists are not interchangeable

A very lucky few will find a CPA that can specialize in the tax credits they are trying to apply for, but for a majority of people who are looking for business tax credits they will need both.

A CPA can apply tax credits to your taxes, however a tax credit specialist will be the one to find the tax credits, tell you how to fulfill the requirements necessary for you to qualify for those credits, and then make sure that you and your CPA have all the paperwork and forms necessary to apply those tax credits to your taxes.

Do not cut corners and pick one over the other. You could end up leaving money on the table.

WOTC Piggy-Back Credits: Do They Apply to You?

WOTC, the Work Opportunity Tax Credit, is a point-of-hire tax incentive provided by the federal government that rewards businesses for hiring employees from certain target groups. These groups of people constantly face employment barriers and have traditionally held high unemployment rates. If you hire an applicant who qualifies for WOTC, you may receive a reduction to the amount of taxes you owe.

As determined by the IRS, target groups include:

  • Qualified Veterans
  • Unemployed Veterans
  • Long Term Unemployed
  • Long Term Family Assistance Recipients
  • Food Stamp Recipients
  • Supplemental Security Income (SSI) Recipients
  • Welfare Recipients
  • Summer Youth
  • Ex-Felons
  • Designated Community Residents
  • Vocational Rehabilitation

The Work Opportunity Tax Credit is calculated based on your employees’ wages and on the number of hours they work. It’s important to understand that existing employees cannot be screened for WOTC, since it’s offered as a point-of-hire credit. Only new applicants may be screened, and they cannot have worked for you before.

Depending on where you are located, your state likely will offer tax credits to encourage businesses to hire employees from, and invest in, the target groups that are listed above. If you hire individuals from any one of these groups, you may be eligible to receive what is known as a “WOTC Piggy-Back Credit”. Employees or applicants who qualify for WOTC may also qualify for these Piggy-Backs; you may be able to get State credit using the same screening process that is used for WOTC—hence the name for these additional credits.

States that have WOTC Piggy-Back Credits include:

  • Arizona
  • California
  • Louisiana
  • New Mexico
  • New York
  • North Dakota
  • South Carolina
  • Washington

These State credits can range from several hundred dollars up to $35,000 per qualifying employee (up to 40% of first year wages for certified workers). Currently, WOTC is authorized for any new hires that have occurred after December 31st, 2014, and before January 1st, 2020. Any unused credits may be either carried back one year or carried forward for 20 years.

Businesses can claim billions of dollars each year in tax credits under the federal Work Opportunity Tax Credit and the accompanying Piggy-Back Credits. Unfortunately, however, it often happens that employers hire individuals who qualify for WOTC (and additionally, WOTC Piggy-Back Credits) and neither the employee nor employer know it.

If you need help identifying the WOTC Piggy-Back Credits that are available to you due to your location and would like to receive the maximum tax credit possible, give Tax Credit Group a call; we’re here to help.

Things to Know About Paid Family/Medical Leave Tax Credits

A few years ago, the IRS made some changes to the tax credit employers receive for giving employees paid family or medical leave. The IRS code section 45S will be in effect until the end of this year, though it’s possible that Congress could decide to extend it beyond December 31, 2019.

For employers, it means that offering that added benefit to your employees comes with a tax perk.

What must I do to claim the credit?

The first thing you need is a written policy for your employees. This policy must include at least two weeks of paid family or medical leave annually for all full-time employees. The leave will be prorated for part-time employees.

This policy must have an effective date. You can only deduct the paid leave wages that were paid out following the effective date of your policy. It is possible to make a retroactive effective date as long as it falls inside the taxable year that the policy was adopted. For example, if the policy was adopted on July 1, 2018, the effective date can be January 1, 2018 and still work.

The paid leave must equal at least 50% of the wages that the employee normally makes.

Who can qualify for the credit?

Anyone who has worked for you for at least one year and received less than $72,000 in paid leave can qualify for the credit.

What kind of leave can qualify?

There are restrictions on what kind of leave qualifies for paid family or medical leave. The leave must fall into one of the following categories:

  • Birth of the employee’s child and to care for that child;
  • The adoption or fostering of a child;
  • Caring for a spouse, child or parent with a serious health condition;
  • An employee dealing with a spouse, child or parent being called to active duty in the Armed Forces;
  • Care for a service member that is related to the employee.

If the leave that you cover does not fall into one of these categories, then that leave does not qualify for the paid family or medical leave tax credit.

How can I determine how much of a credit I receive?

The IRS calculates the credit by taking a percentage of the wage that’s paid to the employee while the employee is on leave. There’s a cap of 12 weeks per year on the pay.

If an employee receives 50% of their pay, the employer will receive 12.5% of that in tax credit. For every percentage point the pay goes up, the credit is increased by 0.25%.

Does this credit affect my other business tax credits?

Yes. You can’t double dip and take wage tax deductions or credits and then also take paid leave credit.

These are just some of the basic rules that help you establish a paid family and medical leave policy within your company. There are other, more intricate rules and it’s important that you talk to your tax adviser before you start enacting a paid family and medical leave policy in your company.

If you have any further questions, you can also reach out to us here at The Tax Credit Group. We have a team of professionals that can help you with all of your needs.

Tax Relief for When Disaster Strikes

The start of summer also marks the beginning of hurricane season for the south and eastern parts of the United States and the start of wildfire season in western parts of the United States. While no one ever wishes that disaster strikes, there’s always the possibility.

For those who have had the misfortune of dealing with a major disaster or are worried that you might one day, the IRS does have solutions. Despite popular belief, the IRS does not have it out for anyone. In fact the IRS is in the habit of helping people and businesses dealing with a major disaster.

How Do I Know if I Qualify?

The first thing you need to establish is whether or not the disaster you experienced was large and impactful enough for it to be declared a natural disaster by the Federal Emergency Management Agency (FEMA). This is important because the IRS only recognizes incidents that were declared emergencies by FEMA.

For a list of the qualifying events, you can visit the IRS here.

Have I Met All Tax Deadlines Following the Disaster?

If FEMA has declared your event an emergency, then the IRS extends several deadlines for business owners including payroll taxes, quarterly estimates and even filing your return. Note that this is an extension, which means while they may not be due now, those taxes will eventually be due.

Make sure you plan and prepare for that bill so you’re not surprised when the deadline finally arrives.

How Can I Get Tax Relief Quickly Following a Disaster?

One of the key things the IRS does to try and help disaster victims immediately is to allow them to amend their tax returns from the previous year. This is important because it means the taxpayer can receive a disaster-related tax refund without waiting.

In addition to allowing these amended returns, the IRS also expedites the processing of the returns to make sure refunds are handed out as quickly as possible. For details on amended returns visit the IRS website here.

When you amend your return, it’s important that you look at the casualty loss deduction and itemize your return if necessary.

According to the IRS, “A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. A casualty doesn’t include normal wear and tear or progressive deterioration.” (For full details, visit the IRS website here.)

Make sure that any deductions you take are calculated after you receive an insurance reimbursement or take the potential reimbursement out of the amount you’re deducting. The IRS doesn’t let you double dip by getting a tax deduction for a loss and getting a payout from insurance.

What if I Don’t Live in the Disaster Area, but I’m Still Affected?

The IRS tries to cover all of its bases when it’s dealing with taxes so there are no loopholes for people. That’s why the agency actually has a policy to deal with people that are affected by the disaster even if they do not live in the disaster area. Affected parties include people whose tax preparers operate in the disaster area and people involved in business partnerships or corporations that operate in disaster areas.

For full details, you can visit the IRS website here.

Extra Relief for Major Disasters

The IRS also understands that some disasters are more devastating than others and therefore have a bigger financial impact on businesses, that’s why extra tax relief can be added on in some situations.

For example, in 2017 businesses in parts of Florida and Texas affected by the hurricanes received up to $2,400 in deduction per employee.

It’s important that you talk to your tax professional about any deductions that may be available to you or your business following a major disaster. The advice offered in this article is not based on your specific situation and therefore may or may not be the best advice for you. If you need help making sure you get the best tax benefit for your situation, you can always contact us here at The Tax Credit Group.

Ways to Go Green and Save Your Business Money

Making your business environmentally friendly isn’t just good for the Earth it may also be good around tax time. That’s because the IRS has a lot of tax credits and deductions in place for businesses that make an effort to go green and encourage their employees to do the same.

Encourage Bicycling to Work

Under the Tax Cuts and Jobs Act of 2018, employers are allowed to deduct some bicycle commuting reimbursements that they give to their employees as business expenses. From now through 2025, you can reward your employees for bicycling to work, and then take a tax deduction as a result. In order to qualify, you must reimburse the employee through their wages.

Consider Green Energy Sources

The Business Energy Investment Tax Credit will reward you for investing in energy-saving modifications on your business. When you work things like solar panels, fuel cells, small wind turbines or geothermal systems into your business or office building, you may qualify for a tax credit.

The credits are starting to phase out and will almost completely expire in 2022. In 2019, you have the opportunity to get anywhere from 10% to 30% in tax credits. Check the Energy.gov website for an idea of what kind of credit your business is eligible to receive.

The credit only applies to “investment credit property”, in other words, something that can be depreciated or amortized. You must also own the equipment or property or, in the case of the equipment, you have built it yourself.

Consider LEED Certification

If you own your own building and go green enough, you may qualify for Leadership in Energy and Environmental Design (LEED) certification. The rating system was created by the U.S. Green Building Council.

While the tax benefits are limited for LEED certification (the aforementioned Business Energy Investment Tax Credit is one of them), according to the U.S. Green Building Council, LEED certified buildings lease faster, have higher resale prices and use less energy, water and other resources.

Make Energy Saving Changes Within the Office

This one isn’t really a tax savings tip, but it is a money saving one. The next time you’re shopping for new light bulbs for the office, choose Energy Star qualified ones. Or choose Energy Star approved appliances for the break room. Energy Star is a government-backed agency that backs the most energy-efficient products on the market.

In other words, use the money you already set aside for office supplies and appliances and buy Energy Star approved items. Not only are you lowering your utility bill, but in the case of appliances, you may also qualify for money back rebates offered for purchasing Energy Star appliances.

Check to See What Your State Offers

Depending on your state, you may also qualify for state tax deductions or credits that overlap with the ones you receive at the federal level. The website Dsire USA breaks down every state’s energy policies and incentives. Check the site to make sure you’re receiving the full benefit of any environmentally friendly changes you make to your business.

As with all the advice we offer, you should talk with a tax professional before you make a decision about what’s best for your business. The Tax Credit Group is happy to offer any support it can for your specific situation. Just send us a message and we’ll cater our advice to your particular situation.

How Small Businesses Can Take Advantage of Tax Savings when it Comes to Retirement

According to the Small Business Administration’s latest survey, there were approximately 30.2 million small businesses in the U.S. in 2018 with a total of 58.9 million employees. That means a majority of those small businesses were run by just one person, maybe two at the most.

Small business owners are stranded in a weird limbo when it comes to retirement. Unlike regular employees who have a steady paycheck that they can draw from to stash away cash for retirement, small business owners operate differently. The good/lucky ones can take a steady paycheck from the company. The others may be struggling from month to month and see their pay struggle as well.

So what are the retirement plan options for small business owners and how can they stretch that money as far as possible through tax credits and tax deductions.

Traditional IRA

Tax Benefits: These are pre-tax funds that go into a Traditional IRA so you’re making your money go further in the beginning. Just remember, you will be taxed when you withdraw those funds. In some cases, you can deduct a portion or all of the money you contribute to your Traditional IRA from your taxes.

Limitations: The IRS is constantly updating this, but for 2019 anyone under the age of 50 can contribute up to $6,000 to their IRA. Anyone over the age of 50 can contribute up to $7,000.

Roth IRA

Tax Benefits: None when you start out because you’re depositing funds that have already been taxed, however, when you retire the funds are withdrawn from the plan, tax-free.

Limitations: The amount you can donate to your Roth IRA will depend on how much money you make and whether you file your taxes single, married or something else. The upward limitation is $6,000 for anyone under the age of 50 and $7,000 for anyone over the age of 50, though that limit can be decreased or even be zero if you make too much money.

The Roth IRA is really for small business owners or employees who don’t make a lot of money and remember in the case of small businesses, a lot of time the income from the small business is also counted as your personal income.

SEP IRA

A SEP IRA or Simplified Employee Pension IRA is a method of saving for your employees and yourself. In many cases, it may be just you as a small business owner.

How is it different from a Traditional/Roth IRA?

While the term IRA is used, the SEP IRA is very different from a Traditional/Roth IRA. The SEP IRA is a pension plan, which means the company is making a contribution on behalf of the employee. With small businesses, this is often the same person, but it is an important distinction.

Additionally, the upward limit of what can be contributed to a SEP IRA can be much higher than what can be contributed to a Traditional/Roth IRA.

Tax Benefits: The biggest benefit of the SEP IRA is that the company can take a tax deduction for contributions. Because this is along the lines of a pension plan, this also includes deposits made into any employee accounts.

Requirements: As with anything having to do with taxes, the more deductions you’re allowed, the more hoops you have to jump through. The SEP IRA must be registered with the IRS, so you’ll have to fill out a form. You’ll also need a written agreement with all of the employees involved and you’ll need to set up IRA accounts for them.

You can find a full list of the requirements here.

Limitations: Every employee must receive the same percentage of compensation in a SEP IRA and that compensation is capped at $56,000 (for 2019) or 25% of annual pay, whichever is smaller. SEP IRAs are only available to people 21 and older and they must have worked for your company for three of the last five years.

In other words, this is an option for more established businesses, not new ones.

You can see a full list of the rules here.

Other Benefit: According to Investopedia, the real benefit of the SEP IRA is the ability to contribute based on the health of the business. If the business is having a down year, you can skip the contribution to the SEP IRA entirely.

One-Participant 401(k)

When you think of a 401(k) plan, you usually think of something that’s offered by large corporations and businesses, but the IRS actually has what it calls a one-participant 401(k) plan or Solo 401(k).

It’s a plan specifically set up for small business owners with no employees, though they can add their spouse to the plan.

Tax Benefits: Whatever your company matches in contributions to the 401(k) plan can be deducted from your taxes. That means you may put $5,000 into the 401(k), use company funds to match it up to 25% of the contribution and then deduct that match against your taxes.

Limitations: The real downside of this option is that you cannot have any employees. If you do, it immediately disqualifies you from this option.

Other Benefit: The true benefit of a 401(k) plan compared to other plans is the upward amount you are allowed to contribute. You can put up to $56,000 or 100% of your salary (whichever is less) into your retirement, plus your company can match up to 25% of that contribution, which means more savings when times are good.

Other Plans

There are other options to employers such as the Simple IRA or Defined Benefit Plan, but both can be significantly more costly to small businesses and usually aren’t options unless your business is well established and has great cash flow.

Additional Tax Benefits

No matter what plan you choose, remember that you may be able to qualify for tax credits on the cost of starting up the retirement plan. The IRS offers tax credits for the first three years of startup costs, up to $500.

When you’re running a small business, every penny counts, so be sure to look into that as well.

If you’re a small business owner looking to start up a retirement plan for yourself or your employees, make sure you talk to your financial advisor first. You can also reach out to us here at The Tax Credit Group. We’re always happy to help.

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