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Tax Credits Small Business Owners Often Miss

Small businesses in growth mode need to scrounge for every spare cent they can, and that results in some strange bedfellows … including the Internal Revenue Service. That’s because the IRS, while good at striking fear in the hearts of many Americans, also provides assistance to entrepreneurs in a few ways, including tax credits.

Yes, there are more conventional and less mentally daunting ways to save money than diving into the U.S. tax code, such as using cost-effective marketing tools and even going green. But believe it or not, the taxman can actually be one of your greatest allies in the hunt for extra budget.

Tax strategies such as setting up your business structure for maximum tax benefit, or hunting down deductions, are available to most up-and-coming companies. And of course, there are tax credits, which help whittle down your tax liability.

A few credits, such as the Small Business Health Care Tax Credit, are well-advertised and frequently talked about. However, here’s a quick look at a few tax credits many businesses might accidentally overlook.

5 Tax Credits You Don’t Want to Miss

1. Retirement Plans Startup Costs Tax Credit: If your business boasts 100 or fewer employees, and you are starting up a SEP, SIMPLE IRA or other qualified retirement plan, you may be eligible for a tax credit worth 50% of the startup costs, up to $500 per year. This credit goes toward plan setup, administration and education.

2. Work Opportunity Tax Credit: You can qualify for the Work Opportunity Tax Credit (WOTC) if you hire people in various disadvantaged target groups, including food stamp recipients, unemployed (including disabled) veterans and ex-felons, among others. This tax credit ranges from $1,200 to $9,600.

3. Disabled Access Credit: Along the same lines, small businesses of 30 or fewer employees, or that made less than $1 million last year, may qualify for tax credits to offset some of the expenses for providing access to persons with disabilities. (Note: The IRS also allows businesses to combine this credit with a “Barrier Removal Tax Deduction” of up to $15,000 awarded to companies that “remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly.”)

4. Fuel Tax Credit: If your job involves occasionally getting your hands dirty, you may qualify for this tax credit. If you’ve purchased fuel for things such as boats used in commercial fishing, or bulldozers or forklifts for construction (check out eligibility requirements here), you may claim a credit for the federal excise tax you paid on those fuels.

5. Credit for Increasing Research Activities: Certain qualified small businesses doing technological research and development may earn a tax credit to help with R&D costs. Up to $250,000 of this credit can be used against the employer portion of Social Security taxes.

The Credit for Increasing Research Activities comes with a laundry list of criteria that determine what types of businesses and research are eligible – and many tax credits are equally as complicated. That’s why the best way to identify and begin planning to capture all of the business tax credits you may be eligible for is to talk to a tax professional.

McManamon & Co. offers several tax services to small businesses, including building a strategy that ensures you pay as little tax as possible while still staying above-board with eligibility requirements.

Every extra dollar helps when you’re a small business owner. Call McManamon & Co. at 440.892.9088 or contact us online for assistance collecting every dollar the IRS is willing to give your company.

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