What Are Tax Credits?
A tax credit is a government-created incentive that gives qualified business owners a dollar for dollar value to offset taxes owed. The government initiated tax credits to help stimulate business growth and economic growth. Even though tax credits for businesses have been around for decades, there are still many misconceptions about how tax credits can be generated, their benefits and uses. Below, we’ll go over 3 major misconceptions about tax credits.
1. My CPA/Controller Can Do It
Generating tax credits does not fall within the general scope of accounting. Each tax credit program has its own specifications and jurisdictions. Additionally, the requirements and laws change constantly for each program. That’s why it’s so important for companies to hire tax credit specialists that keep up with the changing laws and requirements. It would be an unfair and daunting task for your CPA or Controller to generate tax credits specific to your business. Hire a tax credit specialist for a proper assessment of your tax credit eligibility and take full advantage of the tax credits available for your company.
2. Using Tax Credits Can Trigger an IRS Audit
Most business owners think that their companies are more susceptible to audits when they take advantage of tax credits. This is simply not true. According to the IRS (http://1.usa.gov/1LyLep3), audits happen for 3 main reasons:
- Random selection through a statistical formula
- When tax forms don’t match with the financials of the business
- When the company’s business partners or business investors are audited
3. Tax Credits Won’t Really Help My Company.
Over the years, we have helped a wide range of businesses generate hundreds of millions of dollars in tax credits. We have personally seen how tax credits have given companies more money to expand in different areas, hire more people, and, in some cases, even save businesses from closing. Depending on the types of tax credits your business is eligible for, you can recoup money lost from corporate income taxes from previous years. Business owners have nothing to lose by hiring a tax specialist.