Ways to Make Your Business More Profitable This Tax Season

By Ronald Zmuda | Published: January 23, 2020

Man does time fly! But just because we are already into the New Year, doesn’t mean that there are not strategies that we can employ to increase your business’s bottom line, both now and into the future. Both looking back and going forward, there are several often missed tax strategies that we can find that can help a business put money back into their pockets come tax day year after year.

Have you hired any employees during the past year? The Work Opportunity Tax Credit (“WOTC” or commonly referred to as the “Hiring Tax Credit”) is a federal tax credit available to employers who hire and retain individuals from target groups with significant employment barriers. These groups include:

• Veterans;
•  Recipients of SNAP (aka Food Stamps);
• Employees that were on Unemployment for at least 6 months;
• SSI recipients;
• Youth summer jobs (16 and 17-year-olds hired during the summer);
• Ex-felons;
• Disabled individuals; and
• Young professionals (18-39-year-olds) living in designated communities (much of Cincinnati falls under this category!)

Employers can claim about $9,600 per employee in tax credits per year under the WOTC program. Additionally, there is no set limit to the number of individuals an employer can hire in order to claim the tax credit.

Have you purchased or built a building used in your business during the past year? Consider having a Cost Segregation Study performed. Cost segregation is a tax deferral strategy that frontloads depreciation deductions into the early years of ownership. Segregating the cost components of a building into the proper asset classifications and recovery periods for federal and state income tax purposes results in significantly shorter tax lives (5, 7, and 15-year) rather than the standard 27.5 years (for rental real estate) or 39 years (for most other types of real property) depreciation periods. Plus, with the current 100% bonus depreciation, even more, can be frontloaded. In other words, you are able to defer taxes, putting more cash in your pocket to use or invest today. For a more detailed description of what a Cost Segregation Study is, click here.

Is your business in the manufacturing, engineering, technology, or medical industry?  Many business owners see the “Research and Development” tax credit and instantly think to themselves that this only applies to companies like big pharmaceuticals and Microsoft, etc., but this couldn’t be further from the truth. Basically all businesses outside of the service industry likely have some significant components that qualify for the R&D tax credit. Up to 20% of a business’s qualifying expenses can be claimed as a tax credit up to $250,000 per year.

These are just some of the highlights on how we can make your bottom line a little, or a lot, bigger both right now, and in years to come. If any of these pique your interest, please contact attorney and CPA Ron Zmuda at rjzmuda@woodlamping.com or your Wood + Lamping attorney so that we can perform a risk-free feasibility test just for you.