Tax Credits: What May Be Missing in Your Bottom Line

Transcription

1 Tax Credits: What May Be Missing in Your Bottom Line TaxBreak December 13, 2012

2 CompuPay is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website:

3 Housekeeping Course Level: Basic Prerequisites: None required Advanced Preparation: None required Instructional Delivery Method: Group Internet based CPE Credits: minutes. One (1) credit hour is available for this session. Questions Evaluation

4 CompuPay Education Credentials CompuPay, a BenefitMall company, was founded over 30 years ago, is headquartered in Dallas, Texas and services clients in all 50 states. Combined CompuPay and BenefitMall serve more than 160,000 small and mid sized businesses with over 2.7 million employees. Fourth largest outsourced payroll provider in the U.S. We service clients with one to 5,000 employees; our average client size is 18 employees.

5 Shannon Scott Chief Executive Officer, TaxBreak In 2007, Shannon became a partner in TaxBreak and the acting President. In 2009, Shannon was appointed the Chief Executive Officer. Shannon received his BA from the University of Alabama in 1997.

6 TaxBreak Credentials to Educate TaxBreak s Sole Focus - Focused only on tax credit recovery. Demonstrated Success - Recovered $400 million in tax credits. Long Standing History years of experience. National Coverage - Nation s largest privately held tax credit service provider. Unmatched Expertise - Led by tax attorneys, CPAs and technology experts. Extensive Experience Service more than 75,000 locations nationwide.

7 Objective At the end of the presentation, attendees will have an understanding of employment tax credits. Specifically, Attendees will learn about: 1. Understanding employment tax credit incentives 2. What is the Work Opportunity Tax Credit (WOTC) 3. How tax credits can offset hiring costs 4. How to identify tax credit eligible businesses 5. Recent law changes and how they affect the program Questions:

8 Agenda Questions/Answers Discussion TaxBreak & CompuPay Partnership WOTC in the News: Veteran Affairs Defining Tax Credits Take Action Legislative History and Future of WOTC

9 Problem Solved Problem: Billions of dollars in tax credits are forfeited by companies every year due to lack of education regarding these programs. Every new hire not screened for credits can cost companies significantly. Solution: A major factor in a successful tax credit program is timely payroll which makes the CompuPay and TaxBreak partnership a perfect match. We are two experts in our respective fields, working seamlessly together.

10 What Are Hiring-based Tax Credits? Tax credits reduce the actual amount of tax that must be paid. First implemented by the federal government during the Reagan administration. Designed to financially incent businesses to provide opportunities to disadvantaged groups. On average, 20% of hourly wage workers will qualify. Thousands of tax credit opportunities through federal and state programs. Worth up to $9,600 per hire.

11 Tax Credits: A Real Financial Opportunity The Value of WOTC Number of New Hires If 20% of Employees Qualify ,000 10,000 20,000 $25,000 $125,000 $1,250,000 $2,500,000 $5,000,000 Average Credit = $1,250

12 The Importance of Compliance Compliance is Key. Moving from a manual provider to TaxBreak increased a casual dining establishments compliance rate from 11% to 79% within the first four months. Today their compliance is over 95%. $1,500,000 $1,000,000 $500,000 $0 Potential TaxBreak grew their potential credit amount from $143,000 to $1.27 million.

13 POLLING QUESTION #1 Multiple Choice: WOTC & Disaster Recovery credits may earn a business up to in credits. A. $2,400 B. $1,500 C. $9,600

14 While We Focus on Hiring Tax Credits, There Are Many Credit Opportunities Available Work Opportunity Tax Credit (WOTC) New hire demographic credit FICA Tip Tax Credits For companies with employees who receive tips Geographic and Disaster-based Tax Credits Location based credits with look back potential State Tax Credits Over 3,000 types Indian Employer Tax Credits Available for employers located on Oklahoma tribal lands or Indian reservations hiring members of Indian tribes

15 Tax Credit Overview Demographic Based Credits WOTC Processed at State level. Encourages businesses to hire from targeted high-risk groups. 1 and 2 year credits ranging from $2,400 - $9600 per employee. Form 5884 lets you know if a business is already filing for this credit. For certification, businesses must have every new hire fill out Form May carry forward up to 20 years. Short-term TANF Food Stamp Recipients Designated Community Residents Qualified Veterans (Includes VOW to Hire Heroes Act of Earning up to 9,600 per qualified employee Long-term Temporary Assistance for Needy Families (TANF) previously known as Welfare-to-Work 2 yr credit from date of hire, earning up to $9000 per qualified employee Summer Youth Employees Qualified Ex-Felons Vocational Rehabilitation Referrals Supplemental Security Income Recipients

16 Tax Credit Overview Continued FICA Tip Tax Credits Processed in house. The FICA credit provides the food and beverage service industry with a tax credit for the amount of the FICA tax obligation attributable to employee tips received in excess of minimum wage provisions. Form 8846 lets you know if a business is already filing for this credit. May look back up to 3 years.

17 Tax Credit Overview Continued Geographic Locations Processed in house. Specific geographic areas have been designated in order to offer special tax credits and incentives to stimulate local investment and employment. Renewal Communities offer savings up to $1,500 per year for all who live and work in the designated communities. Empowerment Zones offer savings up to $3,000 per year for all employees who live and work in the designated communities. Members of an American Indian tribe or their spouses, who live and work on an Indian Reservation or tribal land, could qualify up to a $4,000 credit. May look back up to 3 years.

18 POLLING QUESTION #2 Multiple Choice: Businesses can carry Demographic credits forward years. A. 20 B. 15 C. 3

19 WOTC: Qualifying for Tax Credits Qualifying businesses: Businesses/owners paying or have recently paid federal income taxes Hourly wage businesses Businesses experiencing employee turnover For-profit businesses *Nonprofits and companies operating at a long-term net operating loss are not eligible.

20 TaxBreak Technology e-signature Capabilities Significantly reduces paperwork and postage Ad Hoc Reporting Build your own reports Payroll Interface Upload payroll directly into client portal Alert System & Messaging Fucntion Alerts on home page of the dashboard Industry breaking news Instant Chat Real time chat with Client Relations Manager

21 POLLING QUESTION #3 Multiple Choice: Businesses that are typically do not qualify to receive tax credit incentives. A. Hourly wage employees, low turnover B. Not for Profits or Long term NOL (net operating loss) C. High turnover, hourly wage employees

22 Equal Employment Opportunity Commission Background: To qualify for the WOTC, an employer must obtain information confirming that an applicant is a member of a WOTC-targeted group before making an offer of employment. Per the EEOC, the IRS Form 8850 and the DOL Form 9061 will not expose employers to liability under the EEO laws. The Americans with Disabilities Act Age Discrimination and Title VII

23 WOTC in the News: Veteran Affairs VOW to Hire Act Passed & signed by President Obama on 11/22/2011. A tax credit worth up to $9,600 is available for hiring veterans. Unemployment rates for veterans returning from Iraq and Afghanistan has risen to 12.1percent, up from 10.6 percent a year ago. 240,000 young veterans from Iraq and Afghanistan are unemployed nationwide percent of male veterans age who have served since September 11 th, 2001, were unemployed last year.

24 POLLING QUESTION #4 True or False: Businesses are exposed to liability under EEO laws by asking the WOTC qualifying questions?

25 WOTC: The Current Hiatus Continuing to Process is Crucial. Once the hiatus is over, the only way full credits are received is if they were processed on time, during the hiatus, in observance of the 28 day deadline from start date. There are no second chances.

26 WOTC Legislative History: October 1996: WOTC was created October 1997: WOTC was renewed October 1998: WOTC extended after hiatus and made retroactive December 1999: WOTC extended after hiatus and made retroactive March 2002: WOTC extended after hiatus and made retroactive October 2004: WOTC extended after hiatus and made retroactive December 2006: WOTC extended after hiatus and made retroactive May 2007: WOTC extends to August 2011* December 2010: WOTC extended to December 2011** Illustrates previous periods during active hiatus. * In May 2007, Congress acted on WOTC before expiration of the current program, extending credits to April ** In December 2010, Congress acted on WOTC before expiration of the current program, extending credits to December 2011.

27 WOTC: Legislation on the Table S.3521 Core Components The Family and Business Tax Cut Certainty Act Extension of WOTC for 2 years through December 31, Extension of Employer Wage Credit for employers who are active duty members of the uniformed services. Extension of Empowerment Zone tax incentives. Extension of Indian Employer Tax Credit. Status: Introduced Reported by Committee Senate Vote House Vote Signed by President

28 WOTC: Legislation on the Table (continued) HR 2082 Core Components Extension of WOTC for 3 years through December 31, Provide alternative certification for six categories, including Designated Zone Residents, Ex-offenders, SSI Recipients, Qualified Veteran s, Vocational Rehabilitation Referrals and Qualified Summer Youths. Reinstate the expired Disconnected Youth Category under a new name, High Risk Youths. Establish a new category proposed by Senate Finance Committee for qualified Recently Discharged Veterans. Status: Introduced Referred to Committee Reported by Committee House Vote Senate Vote Signed by President

29 POLLING QUESTION #5 True or False: Businesses must continue to process during the hiatus and observe the 28 deadline from start date to obtain full credits once the hiatus is over?

30 Hope on the Horizon: Indications of Renewal VOW to Hire Act WOTC has historically enjoyed strong bipartisan support. Strong likelihood WOTC and other tax extenders will be included in final legislation along the lines of S Work of NEON (National Employment Opportunity Network).

31 What Can You Do Today? You can make a major impact with a simple phone call, or letter to your legislative body. To identify the proper contact for your region simply visit: Or visit Click action and follow simple prompts

32 Important Things to Focus on Continue business as usual to ensure no opportunities will be lost. Continue to screen for all categories. Continue to submit WOTC documents to meet the 28 day deadline. Continue to do all due diligence. Recover normal credit amounts through 2011 for all hires based on established calculation algorithms based on extension.

33 Consider us a resource. We are here for you. Got questions? Comments? Concerns? Contact CompuPay: barriebrown@compupay.com. TaxBreak: Marla Caplan VP Sales & Strategic Alliances mcaplan@taxbreakcredits.com