By Jack M. Germain
April 15, 2021, 4:00 p.m. PT
The threatening deadline for filing the 2020 income tax return has been extended from April 15 to Monday May 17, 2021.
If your records are still in the “shrinking” phase, our conversation with a tax professional may give you some tips to save you money, especially if you are a research and development entrepreneur.
The federal tax legislation revised this year and new Covid-19 initiatives offer additional incentives for start-up companies as well as small and medium-sized companies. If you’ve received a Paycheck Protection Program (PPP) loan, you can qualify for that debt forgiveness. and other tax incentives this year offer new deductions to lower your tax burden.
Gig employees and the self-employed need to find out about the latest incentives to save money in this year’s tax return process. Be careful not to overlook any tax breaks that you may be entitled to when doing calculations this season.
Please contact your tax advisor regarding your specific tax situation.
Your situation may qualify you for PPP, R&D tax credits, and other credits that many people are not familiar with but could use. Even better is the expectation that in the next few months, more tax savings benefits will be passed on to employees for certain companies.
“It can be very important to help companies apply for employee retention tax credits that were the same or higher for specific industries,” Brent Johnson, co-founder and CEO of Clarus R + D, told the E-Commerce Times.
Federal Tax Review
In the past, incentive programs were part of an overall tax plan, but in the past they were only really available to very large corporate taxpayers. This situation has gradually changed.
Pretty significant rule changes have taken place, and in the past year, Covid-19 came out of Congress with numerous programs that are precisely in that area of those tax aid programs. According to Johnson, Clarus R + D is helping companies understand how to participate in these programs in order to get the most out of them.
For example, one of the lesser-known programs linked to the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) of 2021 provides assistance to workers and their families.
However, under the Consolidated Appropriations Act, the services were provided at the end of the year. The PPP program is a tax credit program for employee retention. It gives employers a chance this year to look back on 2020 for tax credits for some of their workers.
Johnson sees this as a significant year-end development in the final round of stimulus legislation. The most important provision is an extension of the employee retention tax credit program known as the Recovery Startup Business (RSB) provision. It qualifies business owners with an average of less than $ 1 million in gross income for the past three years who have started a new business or business for an additional tax break.
“This effectively means that the new tax credit product or service offering is eligible for employee retention by simply starting a new trade or business,” he said. In the final quarters of 2021, it can be as high as $ 50,000 per quarter. You will likely learn more about it.
But to make that clear, this is a company-level program. It is not something that the individual employee can claim, he explained.
How the R&D credit program works
The R&D credit program was expanded significantly about five years ago. It’s most relevant to the tech startup space, and lawmakers are preparing to potentially improve it under the infrastructure bill debated in Congress, Johnson noted.
“What happened about five years ago, the government targeted early-stage companies, mostly in the technology arena,” he said.
Qualified tech companies could begin using this credit towards payroll tax obligations. Previously it was only creditable against income tax. Anyone else who does not have an income tax claim could not claim this credit.
The change allowed companies to apply for a tax credit of up to $ 250,000 for payroll tax liability for the first five years. The infrastructure bill proposed extending it to an eight-year period and doubling the amount of credit that can be claimed against federal tax filings from $ 250,000 to $ 500,000, Johnson said.
Also something for mom and pop shops
Loan programs are generally employment, innovation or infrastructure related. As part of the employee retention tax credit, lawmakers lowered the eligibility threshold, Johnson said.
The final change lowers the threshold for how badly your business must be injured. The 50 percent threshold fell to 20 percent.
“A lot more companies will be eligible for this in the first quarter of 2020,” said Johnson.
Another change to consider is the Job Opportunity Tax Credit (WOTC). This affects employers who hire hard-to-hire workers. You can receive a tax credit for attending.
Another thing in the taxosphere from an infrastructure perspective is green energy credits. These should also be part of the infrastructure bill.
“So if you have energy-efficient equipment in your business and you rely on green energy, you have credits available,” suggested Johnson.