disabled access credit

Business Tax Credits

Tax credits help your business save money by cutting your tax. Tax credits are especially beneficial to those in lower tax brackets. The key to utilizing these credits is understanding what tax credits your business may qualify for.

For a full list of possible business credits and their associated tax forms, click HERE. Otherwise, here are some more common credits available to you:

Disabled Access Credit

If you provide access to your business for people with disabilities, you could be eligible for a credit. This credit is applicable to the expenses incurred in making improvements to your business to increase access. The credit amount is up to 50 percent of the cost of your upgrades, but cannot exceed $10,000 per year.child care credit

Employer-Provided Child Care Credit

These days, child care costs are an exponential expense to your employees. Businesses who directly pay for the child care expenses of its employees can claim this credit. This credit is for up to 25 percent of childcare expenses, with a maximum of $150,000 per year.

Investment Credits

What does your business invest in? If you choose to invest in reforestation, building rehabilitation and alternative energy properties, you could receive a credit of 10 percent of these investments. This credit has a $10,000 per year limit.

Research Expenses Credit

This credit is in place to encourage domestic research and development. The calculation of this particular credit is less straight-forward, and the definition is broad. Generally speaking, the following activities may qualify your business for this credit: developing prototypes or models, streamlining internal processes, environmental testing, applying for patents, etc.research credit

Small Employer Pension Plan

You don’t have to be a big business to provide your employees with a pension plan. This credit applies to starting a pension plan for your employees. The credit is for up to 50 percent of setup costs, not to exceed $500 per year.

Work Opportunity Credit

If your business hires employees that have faced significant barriers to employment, you could qualify for this credit. Such individuals might include veterans, food stamp recipients or ex-felons. The credit amount is calculated based on the wages paid to these types of employees, but range from $1,200 to $9,600.electric vehicle credit

Electric Vehicle Credit

If you’re in the market for a new company vehicle, make it a car or truck that draws energy from a battery with at least 5 kilowatt hours of capacity. This hefty credit ranges from $2,500-$7,500 for qualified electric drive motor vehicles. The amount of the credit is largely determined by the battery capacity in excess of 5 kilowatt hours.

All of these potential credits should be discussed with your CPA to determine whether your business qualifies.

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records

Retaining Your Tax Documents

Whether the results of this most recent tax season had a positive or negative impact on your bank account, it’s important to consider how long you should retain your tax documents. This includes a copy of your tax return and any documents providing support of income or deduction items, as well as evidence for any credits received.  A period of limitations is determined by the IRS based on the time in which you could amend a return to claim a credit or refund, or during which the IRS can assess additional tax.

The general rule of thumb is three years. This means you should retain a copy of your return and supporting documents for that return until three years from the filing due date. For example, you should keep the information regarding the return that was due April 15, 2019 until April 15, 2022, at the very least. Keep in mind, these periods are federal guidelines. States may have their own statute of limitations.tax records

Exceptions

There are a lot of “buts” in tax circumstances. Fittingly, if you claim a bad debt deduction or a loss from worthless securities, retain your records for seven years instead of three. If you have ever filed a fraudulent return, or forgotten to file a tax return, the IRS requires you keep your financial records for your lifetime.  Finally, if for some reason, 25 percent of your income was not reported on your tax return, the IRS has up to six years to impose additional tax.

Period of limitations

The IRS has provided the following information on a period of limitations for different scenarios:

  1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
  2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.shred

Disposal

A good scanner has made the electronic retention of these records fairly efficient. However, when disposing of your records and prior tax returns, it’s important to shred any physical documents that may bare identifiable information. Poorly disposed of documents could make you susceptible to identity theft. For electronic information, be sure to have strong security software in place. Keep in mind, that although the IRS may no longer have a use for your records, they could be needed by your insurance company or creditors, in some cases.

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ben franklin

Tax Day | A Brief History

Today’s the day: tax day, April 15. This day is as much ritual to our country as national holidays. However, despite the ceremonious processes that accompany it, it’s more of an anti-holiday in the eyes of most taxpayers. Some years, tax day shifts slightly to accommodate Emancipation Day (a holiday in the District of Columbia), but for the most part, falls on April 15 if the date doesn’t fall on a weekend. So how did April 15 become the deadline for settling our debts to the government?  We bring you a brief history of Tax Day.we the people

The 16th Amendment to the Constitution, ratified in 1913, established the right of the federal government to directly tax individuals. This Amendment was adopted on February 3, 1913, so Congress opted for March 1 of 1914 to be the first filing deadline. However, this amendment didn’t impose an income tax—that arrived with the passage of the Revenue Act of 1913 on October 3, 1913. This act stipulated that individuals with an annual income exceeding $3,000 for single filers or $4,000 for married couples were required to file a return. Those numbers sure have changed!

The new deadline became March 15 when the Revenue Act of 1918 was passed, giving taxpayers a couple extra weeks to gather their tax materials. It wasn’t until 1955 that the Internal Revenue Code of 1954 established April 15 as the new deadline. The explanation for the change was to help taxpayers as the tax laws became more complex and convoluted. House Ways and Means Committee Chair, Daniel A. Reed, expressed that this extra month would also help accountants, tax preparers and the IRS spread out their tax season workload. Another theory arose: that as the income tax applied to more of the middle class the government was issuing more refunds, and the extension of the deadline allowed the government to otherwise utilize those funds longer.taxes

Interestingly, the previous deadline of March 15 symbolically corresponded with the Ides of March—a date on the Roman calendar that served as a deadline for settling debts. As Benjamin Franklin famously said, “In this world nothing can be said to be certain, except death and taxes.” While he wasn’t referring to federal incomes taxes at the time, it’s a fitting sentiment. Taxes are woven into the fabric of our country from their establishment in the Constitution. While today may not feel like a holiday to you, tomorrow is a holiday of sorts for your CPA. Congratulations to you and your CPA on surviving another tax season.

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gift

Understanding Gift Tax

Feeling generous? A gift is a transfer of money or property to another person, without receiving full monetary consideration in return. The federal gift tax’s purpose is to prevent individuals from avoiding estate tax by giving away that money prior to death. This tax is often misunderstood because of its interconnections with the estate tax.

Your yearly and lifetime gift totals would have to be rather lofty to incur taxes. You can gift up to $15,000 in 2019 without filling out the gift tax form. The annual exclusion applies to each recipient. Therefore, you could gift up to $15,000 to multiple individuals, and the annual exclusion will apply to each gift. There’s also a lifetime gift exclusion—which rises to $11.4 million in 2019.gift

Excluded gifts

There are certain gifts that are not taxable. These include tuition or medical expenses you pay for someone (paid directly to a qualified education or medical institution), gifts to your spouse, gifts to a political organization for its use or gifts to qualifying charities (considered charitable donations). These are the only form of gifts that are deductible on your return.

Gifting specifics

If you and your spouse wish to gift joint assets, like property, your annual exclusion rates are combined and applied to the gift. Meaning, in 2019, you could gift, together, money or property valuing up to $30,000. The lifetime exclusion amount doubles for married couples as well. Special rules also allow givers to spread a large, one-time gift across five years’ worth of tax returns (thus preserving their lifetime gift exclusion). Keep in mind that interest-free loans to friends and family are considered gifts in the eyes of the IRS.gift

The paperwork

Above the annual amount of $15,000, you must file IRS Form 709 to disclose a gift. This form will report the fair market value of the gift, the date of transfer, the donor’s tax basis and the identity of the recipient. If any taxes are incurred on the gift, it is the donor who is responsible for them.* The gift tax rate ranges from 18-40 percent. As with most aspects of your taxes, the IRS favors transparency of transactions and evidence. This means, in addition to Form 709, be prepared to provide copies of appraisals for the gift and any documents related to the gift’s transfer.

*some special arrangements allow the recipient to pay the gift tax instead

Lifetime exclusion

Over your lifetime, the IRS keeps a running total of your taxable gifts each year. The IRS does not want individuals to avoid estate taxes on their assets after death by gifting away these assets during their lifetime. From year to year, if you exceed the annual exclusion amount, the excess spills over into the lifetime exclusion category, whittling away at its total. At your time of death, your estate will be exempt from taxation in the amount of your remaining total lifetime gift tax exemption. Thus, amounts in excess of the annual exclusion each year count against both your lifetime gift tax exemption and your federal estate tax exemption.

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