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FREQUENTLY ASKED QUESTIONS
Frequently Asked Questions
We do our best to anticipate the needs and questions of our clients.
Here are a few of the questions we hear regularly.
The employment qualifier is for full-time personnel, so double check your total number of employees and make sure you are calculating it correctly!
You can apply for ERTC if a loss in revenue (or hold in operations) occurred in ANY quarter of 2020.
Follow-up questions: Did you close the business at any point due to government regulations? Were you impacted? Then you may qualify!
ANY business that experienced a revenue decrease and/or operational limitations is eligible. All non-profit organizations (including hospitals, churches, and museums) are qualified for ERC.
Even a partial business shutdown makes you eligible. Other qualifiers include supply chain interference, vendor and/or operation limitations, shortened business hours, and significant revenue decrease.
Since the CAA, qualifications have now been changed from a 50% decrease in business revenue to 20% during the first three quarters of 2021.
Businesses may have both! PPP Loans and forgiven PPP Loans do not disqualify you from ERC.
The Work Opportunity Tax Credit or WOTC is a federal income tax credit earned by US employers. The amount of tax credit earned is based on the amount of wages the employer pays to one or more qualifying employees.
Qualified tax-exempt organizations will claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, as a credit against the employer’s share of Social Security tax. The credit will not affect the employer’s Social Security tax liability reported on the organization’s employment tax return.
Eligibility is based on an employee’s circumstances at the time of hire and prior to hire. There are currently 10 categories or Target Groups of eligible employees. Eligible employees must be Certified as eligible by the State Workforce Agency of the state where they work.
Here is the basic list of the Target Groups for WOTC:
- Qualified IV-A Recipient
- Qualified Veteran
- Ex-Felon
- Designated Community Resident (DCR)
- Vocational Rehabilitation Referral
- Summer Youth Employee
- Supplemental Nutrition Assistance Program (SNAP)
- Supplemental Security Income (SSI) Recipient
- Long-Term Family Assistance Recipient
- Qualified Long-Term Unemployment Recipient
The credit is limited to the amount of the business income tax liability or social security tax owed.
A taxable business may apply the credit against its business income tax liability, and the normal carry-back and carry-forward rules apply. See the instructions for Form 3800, General Business Credit, for more details.
For qualified tax-exempt organizations, the credit is limited to the amount of employer social security tax owed on wages paid to all employees for the period the credit is claimed.
An employer must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. An eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after the eligible worker begins work.
Contact us. Our experienced professionals can assist you with processing of the Form 8850.
Whether you are building, remodeling, expanding, or purchasing a facility, a cost segregation study can help increase your cash flow. Many property owners do not take advantage of these provisions and end up paying federal and state income taxes sooner than they need to.
Cost segregation is a tax deferral strategy that frontloads depreciation deductions into the early years of ownership. Segregating the cost components of a building into the proper asset classifications and recovery periods for federal and state income tax purposes results in significantly shorter tax lives (5-, 7-, and 15-year) rather than the standard 27.5- or 39-year depreciation periods. In other words, you are able to defer taxes, putting more cash in your pocket today.
Cost segregation was first applied and performed by major accounting firms with in-house cost segregation departments on the largest properties of their most significant clients. One study originally cost upwards of $100,000.
Now companies can deliver this same service to commercial property owners at very affordable rates. This means you can take advantage of this tax savings that was once only enjoyed by the owners of exceptionally large properties.
Companies generally request the following information, if available:
- A current depreciation schedule if available
- Building cost information if available
- Appraisals & Blueprints or a floor plan drawing if available
Without a Cost Segregation Study your accountant will only be able to use straight line depreciation, 39 or 27.5 years. A Cost Segregation Study provides your accountant with accurate information to establish 5, 7, 15, and 27.5 or 39-year depreciation schedules, which substantially increases tax savings in the earlier years of owning your property.
It is best to have a study completed for the year the building or improvements are placed in service. However, US Tax Code allow taxpayers to “catch up” on the depreciation that was not claimed from the first day the property was placed in service without amending prior years’ tax returns. Furthermore, the US Tax Code allows for the “catch up” period all in the first year rather than over four years, when the Revenue Procedure 99-49 was first introduced. A cost segregation study can be performed on any property constructed, acquired or remodeled since Jan. 1, 1986.
Choose an engineering-based cost segregation study company that has the expertise in tax laws, cases, and ruling on cost segregation, along with real estate development and construction experience to maximize your tax savings. Only exceptionally large accounting firms have in-house Engineering Analysts who can perform a cost segregation study at substantial fees. A good Cost Segregation company will work with your advisors to help you take advantage of this extremely viable tax savings solution.
In general, a facility may qualify for a cost segregation study if:
- The facility has a depreciable basis of at least $1,000,000 or leasehold improvements of greater than $300,000
- The facility or improvements have been placed in service any time since 1987
A cost segregation study may be performed for:
- New construction
- Purchased properties
- Ground-up, remodel, or expansion
- Leasehold improvements (paid by tenant or landlord)
No. A Cost Segregation Study strictly adheres to the Cost Segregation Audit Technique Guidelines.
Companies who use a trial and error process to solve technical problems qualify for the R&D Tax Credit. If your company evaluates alternatives and uses principals that are technical in nature (i.e. engineering, computer science, or physical sciences) to solve any type of problem then the R&D Credit is for you.
*Pass-Through Entities may qualify for cash with R&D Tax Credits!
A taxpayer can claim the R&D Credit by completing Form 6765. In order to complete this form a company must identify qualified research expenses (QREs) as defined by section 41(d) of the Internal Revenue Code. QREs are connected to qualified research activities claimed. Identifying qualified research expenses usually requires guidance from third-parties with expertise in the various tax law surrounding the credit.
As long as your company is performing qualified research activities, it should be claiming the tax credit. Un-used credits can be carried forward for 20 years and backwards one year.
Yes, the credit can also be applied retro-actively to amended returns for the previous three open tax years. This means that companies who go back and amend returns to claim R&D credits for previous years can potentially receive a refund treasury check for taxes it paid before the credit was applied.
Generally, if your contracts are firm-fixed price then you are still eligible for the R&D Credit. Contractors that work under fixed-price fees and whose work is subject to inspection, testing, and acceptance are considered to be conducting non-funded research. Additionally, if your client can withhold payment until deficiencies are corrected, or if your projects contain warranty clauses, the R&D Credit may be claimed.
The R&D Tax Credit law makes no distinction on whether or not the project has to be successful in order to claim R&D credits. The fact that research and development conducted by a company did not turn out a successful product and solution proves that the company performed qualified research. The research shows that there was significant uncertainty. Qualifying companies include those that have products fail as well as service-based firms who work to provide engineering solutions for a client but are never awarded a contract.