There are a lot of important decisions to make when you’re forming a business, and then as you proceed to run it and grow it. Your business’s yearly tax burden is going to be influenced by some of these decisions, we explain to clients at Geyer Law.
Nick Sullivan of Sullivan Business Solutions couldn’t agree more. As a national consultant to business owners, one of Sullivan’s missions is making business owners aware of the opportunities they have to reduce taxes by taking advantage of certain government incentive programs.
We asked Sullivan to expound on two specific government incentive programs which are of particular interest to us in our practice of business law:
Employee Retention Credit
The ERC was part of the CARES Act, and is meant to encourage businesses to keep their employees on the payroll during the pandemic. The tax credit is 50% of up to $10,000 in wages paid by an employer whose business was financially impacted by COVID-19.
For 2020, the tax credit was 50% of the first $10,000 in compensation ($5,000 per employee); for 2021 the credit is 70% of the first $10,000 per quarter in compensation (up to $28,000 per employee)!
How does the ERC work? The credit reduces the employer’s Social security tax liability. If the credit is larger than the social security liability, the employer can get a direct refund from the IRS for the difference.
As legal advisors to business owners, we think every business owner trying to avoid laying off staff because of the negative impact of COVID-19 needs to explore the employee retention credit.
In contrast to the employee retention credit, which was created to mitigate the financial harm the pandemic has caused to businesses, the WOTC (Workers Opportunity Tax Credits) pronounced like “What Cee”) came into being back in 1996. A big part of the WOTC had to do with SNAP (food stamps), but at Geyer Law, we are particularly interested in the way the program helps unemployed or disabled military veterans.
At Rebecca W. Geyer & Associates we often provide assistance to veterans and their surviving spouses by helping them obtain VA benefits through the Veteran’s Benefits Administration.
Under WOTC, business owners can earn money-saving tax credits for hiring veterans. Eligible military veterans include those who have had difficulty finding a job, and who may have been unemployed for an extended period. The WOTC is designed to help employers who are experiencing shortages in labor while helping to create new jobs. The amount of tax credit a company can receive ranges from $1,200 to $9,600 for every eligible new veteran hire.
At Rebecca W. Geyer & Associates, we help clients deal with the many decisions that must be made in the course of starting a new business. We thank Nick Sullivan for helping us make business owners aware of the opportunities they have to reduce taxes, while at the same time helping employees keep their jobs and veterans find jobs!
– by Ronnie of the Rebecca W. Geyer & Associates blog team