This tax season, small company owners can take advantage of a wide variety of refundable tax benefits. If you take the time to do things right from the start, stay on top of things, and have access to competent experts, you should be able to succeed in business. If you’d like assistance claiming any of these tax credits, please consult a tax professional in addition to reading this blog. Additionally, don’t forget that you may be eligible for local or state tax benefits. Those we list here aren’t the only options, by the way. Here are seven possible tax breaks for small businesses in 2023.
1. The Work Opportunity Tax Credit
The Work Opportunity Tax Credit will serve as our first example. Form 8850 must be completed. If you hire members of certain underrepresented groups, you may qualify for the Work Opportunity Tax Credit. Companies that employ people who “consistently confront impediments to employment” (according to quote the US Department of Labor) may be eligible for a tax credit.
According to the Internal Revenue Service (IRS), the following demographics are of particular concern:
• Individual Eligible for the IV-A Program
• Qualified Wartime Veteran
• Certified Local Resident
• Career Counseling and Placement
• Student Worker in the Summer
• Member of the Supplemental Nutrition Assistance Program (SNAP)
• Person Receiving Supplemental Security Income (SSI)
• Recipient of Family Assistance for an Extended Period
• Individuals Eligible to Receive Long-Term Unemployment Benefits
Credit of $2400 can be claimed, which is equal to 40% of the first $6000 of the employee’s first year’s wages. Firms that hire military veterans or persons receiving long-term family support might qualify for increased tax credits.
2. Employee Retention Tax Credit
Under the CARES Act, employers can claim a tax credit for retaining key employees. This tax benefit is meant to encourage companies to keep their workers on staff. W2 employees are eligible for up to $26,000. For more details on ERC, check out this blog.
3. For the Contribution to the Increasing Rate of Research (R&D Credits)
Did you realize that conducting the research might earn your small business tax breaks?
If your company performs approved research, you may be eligible for a tax credit. These actions might get you this tax break:
• A New Prototype Is Being Developed.
• Creating new, original goods and then trying to sell them
• Innovating a fresh method of production or trade
• Enhancing the effectiveness of products or current company procedures
• Raising the bar on your company’s quality assurance practices
• Certification and/or environmental testing
A 10% tax credit is available for qualified R&D expenses. To be eligible, your business must be privately held and not have had more than $50 million in total sales in the preceding three years.
Our number one piece of advice for claiming this tax credit is to maintain detailed records of all of your R&D efforts. That includes things like lab reports, process flowcharts, and project notes.
4. Tax Relief for the Disabled
How many clients do you serve who are disabled? Is there any way to tell how many persons with disabilities are using your website? In order to ensure that the requirements of the disabled population are being met, it is important that you are aware of this. Additionally, tax relief advocates have stressed the significance of making your website accessible to people with disabilities, not only to comply with legal requirements but also to enhance inclusivity and broaden your user base.
One way the government encourages companies to make their facilities accessible to people with disabilities is through the Disabled Access Credit.
The Americans with Disabilities Act (ADA) was passed in 1990, therefore it’s important that you’re aware of it. Making your company accessible might be costly, but if you qualify for the Disabled Access Credit, you could receive some financial relief.
In other words, your company may be eligible for this credit if it has annual sales of less than $1 million or if it employs 29 full-time workers or fewer. You can use this credit to pay for half of your annual expenses between $250 and $10,000.
5. Tax Deduction for Employer-Offered Child Care
Companies that provide childcare benefits to their workers are eligible for this tax credit. An incentive for you to hire people and offer benefits.
The Employer-Provided Child Care Facilities and Services category include the following costs:
• Childcare facility construction, renovation, or expansion funding
• Money is spent on things like salary for staff at an established daycare center.
• Funds allotted to an approved daycare provider for the provision of services and referrals
• If your company qualifies, you can get a tax credit for up to 25% of your daycare costs. • Also, 10% of the money or recommendations are spent on child care. You can only get up to $150,000 in any given tax year. There can be no less than “qualified childcare facilities” in each building.
6. Cost-Sharing for Initial Pension Contributions to Small Businesses
The establishment of a retirement plan for your staff is made more affordable by this tax incentive. Only companies with 100 or fewer employees throughout the tax year are qualified for this tax benefit. Each of these workers deserves at least $5000 in annual compensation. In addition, the company must have offered a pension to the same group of workers within the prior three years.
This tax break is applicable to many standard retirement plans, including 401(k)s. Administrative expenses associated with informing employees about their benefits and alternatives under this plan are eligible for a credit of up to $500.
7. New Markets Tax Credit
Businesses that put money into CDFIs and CDEs (community development organizations) are eligible for the New Markets Tax Credit (CDFIs). The latter is crucial in extending aid to many underserved communities by making financial resources available to them.
Because of the SBA’s collaboration, more people from underrepresented communities will be able to enroll in the Paycheck Protection Program.
This credit is available for those that make purchases, perform renovations, or build in low-income communities. Furthermore, if your project involves the building or renovation of a school or community center, you may be eligible for funding. If you own a company that specializes in renovating and selling single-family homes, you may also be eligible.
It’s awesome if the initiatives target marginalized groups like women and girls.
Get in touch with tax experts for help claiming the deductions and credits available to your business. Please take the time to learn more about these credits as they can be applied for in order to grow wealth and leave a legacy. As an added note, keep in mind that this is by no means an exhaustive list. There are additional tax credits available to you at the state and local levels in addition to those offered by the federal government.
Finally, we recommend reaching out to Stenson Tamaddon for assistance with the Employee Retention Tax Credit.