How to Get Small Business Tax Credits & Incentives | How We Saved $100,000 on Business Tax Expenses!

do you want to know how the rich get away with paying little to no taxes while others overpay on their taxes like do you really want to know i can tell you for a fact that there are incentives baked into the tax law that allows businesses and individuals to save on their taxes what most people don't understand is that the government uses the tax code to motivate people to take actions related to their economic agenda yes even many accountants i know aren't aware of the tax incentives that small and large businesses are taking advantage of to dramatically reduce their tax liability hi my name is sherman a cpa with life accounting a full service accounting firm that helps small businesses grow and manage their finances in this episode i'm going to uncover and fully break down small business tax credits and incentives that can put tax dollars back into your pockets and in case you're wondering this isn't another video about how the rich uses tax shelters to send their money offshores to evade taxes altogether or how you can set up a bunch of llc's and nonprofits to evade the tax system no what i'm going to tell you today is actually legal so legal that it's actually right on the irs and state government's websites most people just have no clue that it exists by the way if you're new to our channel please be sure to subscribe so you don't miss out on future episodes that can help you save a lot of money and grow your business also if you extract any value from this video then please help me out by clicking the like button below we put out so much content every single week and your likes help us to continue to push content like this out to help you grow your business last thing here the information in this video is solely for informational purposes only it is not meant to take the place of legal and accounting advice specific to your business if you need specific accounting or tax advice then be sure to contact one of our cpas directly with that said i hope you're ready for a fun ride because by the end of this episode you should be able to take advantage of at least one tax credit i hope to lower your tax liability and put more money in your pockets with that said let's get started with the most important information up front how do most businesses save on taxes most small businesses lower their tax liability through taking advantage of small business tax deductions and business tax credits now these two words tax deductions and tax credits are often confused many people think they mean the same exact thing and they don't they don't at all tax deductions are simply eligible expenses that you incur while running your business that can be deducted from your business income so if your business income for the year is 500 000 and you three hundred thousand dollars in eligible expenses then you could deduct those expenses from your income and only pay tax on two hundred thousand dollars in income opposed to five hundred thousand if we assume that your effective tax rate is let's say 25 then you would pay 50 000 in taxes opposed to 125 000 in taxes by the way if you're interested in learning more about the biggest tax deductions to help you reduce your taxable income then check out my video on the 14 biggest tax write-offs for small businesses now let's talk about tax credits tax credits on the other hand directly lower your tax liability so if you owe 50 000 in taxes then you could use tax credits to lower this tax liability dollar for dollar so if we compared a tax credit in a tax deduction side by side then a tax credit would be much more valuable to you this is because a tax deduction reduces your income which is still taxed and a tax credit reduces your actual tax liability allow me to explain with a very simple example let's say you had ten dollars in income and you could deduct two dollars as a tax deduction then your remaining income would be eight dollars if we assume your tax rate is 25 then you would owe two dollars in taxes now on the other hand if you had 10 dollars in income and your tax rate is 25 you would owe 2.50 cents in taxes but wait if you had a two dollar tax credit then you would reduce this to just 50 cents that you would owe in taxes that's how powerful tax credits are and the really cool thing about tax credits is that in many cases they are refundable this means that if it lowers your tax liability so much that you do not owe anything to the government then the government would pay you directly in the form of a refund so for example if you owe two dollars in taxes and had a three dollar tax credit then the government will be paying you one dollar in the form of a tax refund now obviously this is an oversimplified example because in many cases the actual numbers we're dealing with are in the thousands tens of thousands and even hundreds of thousands of dollars in terms of what you can save on your business taxes and i really want you to understand this so that's why i'm dedicating the rest of this episode specifically to tax credits okay then so what are small business tax credits and why do they even exist business tax credits are credits that are available for businesses when they file their annual tax return these credits are used to offset a company's financial obligations aka taxes to the government now this is pretty straightforward but why does this even exist why would the government allow businesses to offset their tax payments with tax credits well the government uses tax credits to influence economic conditions and ultimately push their political agenda it is how they motivate businesses to do what they want them to do for example our marketing agency life marketing headquartered our agency in what is called an opportunity zone which is an area that the city of atlanta wanted to invest in to create jobs for their local economy now the opportunity zone tax credit provided a 3500 credit for every job we created in our company unfortunately we quickly grew to over 30 employees which resulted in a six-figure annual tax savings due to this one credit now originally we would have never moved our office to downtown atlanta due to the extra cost around parking and the rent was much more expensive there however this credit paid for all of these expenses and more which led to us creating jobs in that specific area this is how powerful small business tax credits can be the government controls the actions of businesses by providing tax credits to incentivize them okay so by now i'm sure you're wondering how in the world you can start finding tax credits and taking advantage of them if that's you then don't worry the remainder of the time we have today will be spent on this all right let's discuss where you can find tax credits and i'll discuss a few of my favorites along the way tax credits are provided by federal state and sometimes local governments to find federal tax credits you can find them by searching the irs's website and in the description to this video i will provide you with a link to start reviewing the business tax credits available on their website at the time of this video to find state tax credits you can start by searching for your state economic development authority's website for example the state of georgia has an entire book on their small business tax incentives and tax credits they not only explain the full list of tax credits that they have available but they also explain the requirements and who is eligible for them then all you'd have to do is have your cpa verify your eligibility and file the right tax forms when you file your tax return finally you may also be able to find tax credits specific to your city for example atlanta's economic authority invest atlanta has specific tax credits related to their region so search online on a local federal and state level for tax credits so you can find some that will save you money on your tax return so that's how you can start finding small business tax credits but the last thing i want to do here is quickly go over a few of the hottest business tax credits available right now so let's jump right into it number one opportunity in empowerment zones i mentioned this tax credit earlier because i've personally used it for my own business so i think it's fair to start here you should find out if your business is located in an opportunity or empowerment zone these are basically specific zones or zip codes that the government has selected as areas they want to invest in if it works like mines did you can receive a tax credit based on things like the number of jobs you create in your business for example and even if you're not located in an opportunity zone you should still see if there are any located around you i mean imagine being located one block away from an opportunity zone and never knowing about it especially if relocating to that opportunity zone could save you tens of thousands of dollars on your tax return tax credit number two the research and development credit the research and development tax credit can put up to 250 000 back in your pockets the r d credit is a payroll tax credit allowed to any company that has qualified research and development activities now companies from any industry can qualify for this tax credit as long as they are a qualified small business that is conducting qualified research and development activities so if you're researching anything that is technological in nature to develop a brand new or business component in your business then this could be a great tax credit to take advantage of you can find out more about what is actually considered qualified research in a qualified small business on the irs's website number three the work opportunity tax credit the work opportunity tax credit is a credit that incentivizes employers to hire from certain targeted groups that have faced significant barriers to employment for example if you hire qualified veterans or ex-felons you can qualify for business tax credits that can save you in taxes and put money back into your pocket you can view a list of targeted groups right on the irs's website but if you're already hiring people from these targeted groups then you will definitely want to look into obtaining this tax credit the next time you file your taxes all right let's move on to number four employee benefits tax credits if you are a small business that provides health insurance or retirement plans to your employees then you may qualify for big tax savings the small business health care tax credit could put up to 50 of the fees you pay for your employees health care right back into your pockets now boom all of a sudden providing health insurance to your employees aren't so expensive anymore are they there is also the retirement plan tax credit if you're setting up a qualified retirement plan you can also receive a credit on up to 50 of your startup costs this makes offering retirement plans to your employees easier as a small business owner now there are various eligibility requirements for these types of credits so be sure to read the tax guidance on the necessary websites or consult your cpa and then finally number five the general business tax credit the general business tax credit is exactly what it sounds like general tax credits now the truth is there are so many different tax credits out there that i guess the irs came up with the name general business tax credit no but in all seriousness there's over a dozen credits available within this tax credit from credits for expanding into new markets to credits for providing child care services for your employees children because different things apply for different businesses instead of going through each type i just advise that you go through the list and find out if there are any credits that may apply to your business alright so those are some of my favorite business tax credits but please please please keep in mind that there are so many more tax credits out there for you than you can imagine i provided some very general tax credits that i've seen work for myself personally and for some of my clients but please please please keep in mind that there are so many more tax credits out there for you than you can imagine i provided some very general tax credits that i've seen work for myself personally and for some of my clients but be sure to check out your state and local tax credits as well like we discussed also in order for you to take advantage of these tax credits make sure that you have your stuff together your business books and records should always be up to date and you need to have a legit tax advisor that can file the necessary forms for you correctly so that you can take advantage of these tax credits if you need help with any of this then look no further life accounting is a full service accounting firm that will love to help you with your bookkeeping tax planning and preparation anyway enough about us let's go ahead and wrap up today's episode so you can start searching for business tax credits today we started by discussing how the rich saves on their taxes they do it in two ways tax deductions and tax credits anything else you hear out there is probably illegal and can end up with you being behind bars tax deductions are simply expenses you write off from your business income while tax credits are dollar for dollar reductions in your tax liability to the irs since tax credits are more beneficial we went on to discuss where you can find these tax credits you can find them through the federal state and local government website finally we went over some of the hottest tax credits available right now but remember i highly recommend you search on every level to find all the available tax credits specific to your business anyway that's it for today folks i truly hope you enjoyed the content of this episode if you did please hit the like button for me below and don't forget to subscribe to our channel so you don't miss out on future content that can help you grow your business i'll talk to you soon [Music]

Channel: LYFE Accounting

Views: 92,568

Keywords: tax credits, business tax credits, small business tax credits, business tax deductions

Id: WIYZ0lbxOBU

Length: 16min 18sec (978 seconds)

Published: Mon Dec 07 2020