As a business owner, it’s always important to maximize your ROI and grow your bottom line. But with the pandemic continuing to impact many business’s bottom lines, it’s never been more important to uncover hidden savings.
Today we’re sharing three often overlooked tax credits that could save you money and reduce your liability this tax season.
Off Site Alcohol Sales Could Open Up An Immediate Refund Opportunity
This potential benefit was actually created by local governments’ response to the pandemic. For the first time in modern history, many restaurants were permitted to sell to-go drinks for off-site consumption. If this describes your business, you may not realize that you don’t necessarily owe certain taxes when customers take their drinks off-site and you could qualify for an immediate refund.
Though tax policy varies widely by state, most charge merchants some form of gross receipts tax on monthly profits. Typically, this is taken care of through straightforward accounting. Likely, your POS system doesn’t even have a different recording mechanism for whether a sale is for on or off premises. However, many states specify either that the tax applies only to on-premises consumption or have different rates for on and off-site consumption. This means you could be overpaying your taxes depending on your state’s laws. The good news? It’s reversible and you can typically take a credit on your next month’s return.
R&D Tax Credit isn’t Just for Scientists
The Research and Development Tax Credit is a government-sponsored tax incentive that rewards companies for conducting R&D. If you run a franchise, you might think there’s no way this credit could apply to you. However, the credit is open to any business of any size and not just scientists and manufacturers. This common assumption means that only a small percentage of qualifying businesses take advantage of claiming this each year.
If your business does any of the following you likely qualify for the R&D Tax Credit:
- Develops or designs new products or processes
- Enhances existing products or processes
- Develops or improves upon existing prototypes and software
This could apply to activities like developing new recipes or creating a new process for ordering. If you do qualify for an R&D tax credit, you can claim it on both the federal and state level to reduce income tax or payroll tax withholdings. The federal program alone can save businesses up to 7 percent on their income taxes.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire and retain individuals from target groups with significant employment barriers:
- Veterans
- TANF recipients
- SNAP recipients
- Designated Community Residents
- Vocational Rehabilitation Referrals
- Ex-felons
- Supplemental Security Income Recipients
- Summer Youth Employees living in Empowerment Zones
The tax credit is dependent on the specific target group of the individual hired, the wages paid to that individual during his or her first year of employment and the number of hours they worked in their first year.
There’s no set limit to the number of people an employer can hire in order to claim the tax credit.
Be sure to check with your tax preparer to see if you qualify for any of these often overlooked tax benefits. And don’t hesitate to reach out to your dedicated OnePoint Account Manager if you need help compiling any supporting documentation from your financial records.
