Coronavirus (COVID-19) and its Impact to Taxes

[Update 3/17/2020] Treasury Secretary Steven Mnuchin said on Tuesday (3/17/2020) that taxpayers can delay paying their income taxes on as much as $1 million in taxes owed for up to 90 days. This postponement applies to federal returns. Please check your state’s tax deadlines for any delays with state filings. On Friday, March 13th, 2020, President Trump declared the spread of COVID-19 (commonly referred to as the Coronavirus) a national emergency. While this declaration has far reaching implications across many industries and sectors, there are also tax implications. The IRS has setup a webpage for taxpayers to keep up to date on how the Coronavirus will impact your taxes: https://www.irs.gov/coronavirus We here at Tax Credit Hero wish you health and … Read More

Frequently Asked Questions about the R&D Tax Credit

As we head into tax season, we wanted to kick of 2020 by answering some common questions we get about the R&D tax credit. Let’s dive into it! The R&D (research and development) tax credit is a federal (and some states) tax incentive, that provides cash benefits to companies conducting research and development in the United States. A tax credit is a dollar-for-dollar reduction of a taxpayer’s income tax. It is NOT a tax deduction! All types of business can claim the R&D tax credit including sole proprietorships, partnerships, S-corps and C-corps. Credit that are claimed but not monetized are carried back one year and carried forward for twenty years. Historically, the R&D tax credit benefitted large, profitable organizations that … Read More

Superseding vs. Amended Returns and Why it Matters for the Payroll Tax Credit

Today is the extended tax deadline for many corporations (with calendar year ends) to file their federal tax returns. However, on October 7th, 2019, the IRS graciously gave victims of Tropical Storm Imelda until January 31st, 2020 to file their individual and business tax returns (including C-Corps whose extended deadline is today, October 15th, 2019 and S-Corps and partnerships whose extended deadline fell on September 17th, 2019). This relief is being offered to taxpayers in multiple Texas counties including Harris, Jefferson, Montgomery, and Orange. You can read more about the IRS’ extension here and here. Given the extension of the extension, what does this mean for a corporation claiming the R&D tax credit? By and large, most companies that claim … Read More

Staying Competitive to Outlast the Trade War (Part II)

We received some questions and feedback from our last blog post about Chinese tariffs and wanted to address our readers directly with an example of how a domestic taxpayer can be adversely affected by the ongoing trade wars, and what our consultancy can do to help. First, a clarification for those of us who are not economists:  A tariff is a tax imposed on imported goods.  Tariffs are paid to Customs & Border Protection at our ports when the goods arrive. Thus, when the goods are sold to domestic consumers, they are at a higher cost than they would have been had there not been tariffs imposed.  The cost of a final product using the foreign sourced material goes up. … Read More

Staying Competitive to Outlast the Trade War

We’ve been reading a lot about our nation’s imposition of tariffs on Chinese goods and the subsequent impacts they are having both domestically and abroad.  We are not foreign policy experts or economists but we do actively reach out to U.S.-based manufacturers and engineers.  Our goal is always to help U.S. businesses grow and remain competitive.  In a market we see as being made more competitive by fear, uncertainty, and doubt, we know one thing that always seems to help is the R&D Tax Credit. After the tariffs were first announced in Q2 of 2018, about 2.6 million new jobs were added to the U.S. economy, including 204,000 jobs in manufacturing.  However, some industries, such as chemicals, paper, and textiles … Read More

Happy Fourth of July!

Wishing you and your family a happy and relaxing fourth of July from everyone here at Tax Credit Hero!

Industry Spotlight: Software

Given the broad definition of R&D, research and development, by the IRS, many companies in nearly all industries can qualify for the R&D tax credit. Software companies, in particular, are constantly conducting R&D by using their creativity and innovation to build or improve upon their product offerings. The R&D tax credit is a Federal tax incentive designed to reward companies innovating in America. Below are just a few examples of R&D activities for software companies: Chances are, if your company develops software for sale, lease, or license, your company is conducting research and development. As long as the R&D occurred in the US, you should consider looking into claiming the R&D tax credit. While R&D tax credits are primarily used … Read More

Payroll Tax Credit Strategies

Many of our clients claim their R&D tax credit and then go on to apply these credits against future payroll taxes. This is a dollar for dollar offset of a Qualified Small Business’ (QSB) OASDI liability (reported quarterly on Form 941). Note that any amount claimed as a credit against your payroll tax is not allowable as a payroll tax deduction.  Only QSBs can elect the payroll tax credit. According to the IRS, your business is considered a QSB if it has the following characteristics: QSBs that intend to elect the payroll tax credit should know of a few limitations: