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Business Credits

01/15/2016

Tax Extenders & The Deficit Dilemma

Though Congress has received some applause for reviving a set of more than 50 tax breaks, called “tax extenders,” there is as much dismay-driven head shaking over the fact that the bipartisan agreement and the now signed budget bill dig the federal deficit hole even deeper.

The new tax law, entitled the Protecting Americans from Tax Hikes (PATH) Act of 2015, and the newly signed funding bill provide $1.1 trillion to cover spending for most government agencies to the end of fiscal year 2016, perhaps coincidentally past the upcoming presidential election. The defense sector, NASA, the Food and Drug Administration and the National Institutes of Health received a bit of a boost with most other agency funding remaining flat. ENews 2016 pic tax-credit3

IRS funding restrictions remain, so it’s expected that taxpayers will continue experiencing communication and customer service problems and an increase in computer-generated correspondence audits throughout 2016 and 2017. The new National Taxpayer Advocate Annual Report to Congress blasts the IRS for planning to “substantially reduce telephone and face-to-face interaction with taxpayers,” turning that job over to tax return preparers and tax software companies.

Meanwhile, the good news for taxpayers is that the PATH Act makes permanent several charitable tax provisions, indicating that lawmakers support using tax incentives to encourage charitable giving. For example, those 70 ½ or older may contribute up to $100,000 from an IRA directly to a charity with the contribution qualifying for their required minimum distribution (also known as Qualified Charitable Distribution (QCD) rules).

Other permanently renewed tax provisions include the American Opportunity Tax Credit for college expenses and the deduction for state and local sales taxes. The schoolteacher expense deduction has been enhanced and made permanent, as has the child tax credit.

The mortgage insurance premiums and qualified residence interest deductions have been extended for another year. Taxpayers who suffered losses from selling their home for less than the outstanding mortgage will also be able to avoid the tax consequences from debt cancellation under the Mortgage Debt Relief Act for another year.

Companies that utilize bonus depreciation like those involved in the telecommunications industry or who invest in capital-intensive projects will continue enjoying this helpful tax provision for a few more years. The tax law also makes permanent the research and development tax credit, which encourages important business R&D like that in the pharmaceutical and defense sectors.

The solar investment tax credit (ITC) and the wind production tax credit (PTC) are being phased out but will remain active through 2019 and 2021 respectively. The energy industry overall has received both tax incentives and funding resources, adding a boost of confidence to alternative energy producers.

Tax increases levied on individuals and businesses to pay for the Affordable Care Act (Obamacare) continue to be unpopular, and some were not enacted. Now it’s possible the two most controversial taxes may be repealed. These are the proposed tax on medical devices and the 40% excise “Cadillac” taxes on higher-priced employer-sponsored health plans that compete with government-sponsored plans.

The 2015 year-end budget battle, which starts our new tax year without delays, was a fistfight compared to the combative, destructive delay-causing 2014 debate. Yet, even as lawmakers are cooling to budget debates, the looming budget deficit has not disappeared and continues to grow. Our 2016 budget will add to the deficit, rather than reduce it. The Congressional Budget Office reports that overall US Treasury debt has grown to 74% of GDP that “could have serious negative consequences for the nation, including restraining economic growth in the long term ... and eventually increasing the risk of financial crisis.”

Overall, the bipartisan tax bill was passed with the understanding that Congress is committed to comprehensive tax reform that will simplify the tax code, eliminate temporary provisions and lower tax rates by broadening the tax base. Lawmakers who supported the PATH Act stated in a news release, “Americans deserve a simpler, fairer and flatter tax code that’s built for growth, and this bill will help make that possible.” The 2016 election year will likely determine how far that ship will sail.

If you have any questions about how the current tax law affects your individual and/or business tax obligation, please contact us now at McRuer CPAs for a tax planning session.

03/17/2012

Health Costs and Tax Credits for Small Business

Small businesses are being reminded about the tax credit available for providing employees health care insurance.

To qualify a small business must:

  • cover at least 50% of the cost of single health care coverage for each employee.
  • have fewer than 25 full-time equivalent employees.
  • have average wages of less than $50,000 per year.

The tax credit applies for the years 2010 to 2013 and reaches up to 35% of the cost of providing health care insurance.  In 2014, the rate is scheduled to increase to 50% for small business employers.

A simple step-by-step guide can help you determine the amount of tax credit you may receive.

Tax credits reduce the total amount of tax you owe dollar-for-dollar. This health care tax credit can be applied backwards or forward to other tax years.

To download the step-by-step guide to figure the amount of tax credit you may qualify for, click on this link: Online Guide to Determine Health Care Insurance Tax Credit

03/09/2012

VOW is WOW! for Hiring Veterans

Hiring a returning war veteran may not only land a business an excellent employee, but it may also provide a nice tax credit as part of the VOW to Hire Heroes Act. New updates are making it easier and faster to process tax credit requests, too.

The credit can reach up to $9,600 per veteran hired by a for-profit business and up to $6,240 for a non-profit organization.  Businesses may claim the tax credit on income tax returns.

New forms and an expanded list of qualifying employers now make it easier to obtain certification needed to verify that a veteran meets program guidelines. New faster electronic submission options are more quickly confirming the credit amount that’s due employers.

The amount of credit depends upon:

  • Length of the veteran’s unemployment before being hired
  • Hours a veteran works
  • Amount of first-year wages paid

~Soldier with Flag in IraqBusinesses that hire qualifying veterans with service-related disabilities also receive the tax credit, many at the maximum allowable tax credit amount.

All of this is an on-going effort to help veterans returning from wars and military actions abroad to adjust to civilian employment opportunities.

Supporters of the tax credit say often business owners who were first attracted to the idea of hiring a veteran because of the tax credit have gladly discovered that the veterans offer a broad skills base and a strong work ethic.

The Department of Labor reports that 20.2 million men and 1.8 million women in America aged 18 and over are veterans who have served on active duty in the U.S. armed forces.  Numbers reflect that male veterans who served in the Gulf War Era have an unemployment rate of 21.9%. 

Survey results also show approximately 25% of Gulf War Veterans have returned home with a service-connected disability.  Current numbers reveal roughly 10% of disabled veterans who are seeking work remain unemployed.

IRS Tax Forms 8850, 5884 and 3800 provide instructions on how to file for the VOW to Hire Heroes credit.  If you have any questions, please don’t hesitate to ask one of our experts at McRuer CPAs.

IRS Information on VOW Hire Heroes Act Tax Credit

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