How Credits and Incentives Help Business Invest in Their Own Communities
By Laurence Barral
Learn how government tax credits and incentives save business money, create jobs, and encourage economic growth
Being a good corporate citizen is not just a slogan. Every successful business serves the needs not only of its clients and employees, but also of the surrounding communities where they operate.
Those needs are varied, including tax revenue generation, commerce, economic development, jobs, housing, a clean environment, public safety, a strong sense of community, and more.
Businesses can help meet the needs of their surrounding communities by taking advantage of many government-sponsored credits and incentives (C&I) that are available to them. These programs allow businesses to put money back into their budget, and in doing so, help their community grow and prosper by creating jobs and revenue.
FICA Tax Tip Credit
For example, the FICA Tax Tip Credit is a federal tax credit available to businesses that have employees who receive tips. If you operate in the food and beverage industry, this credit could reduce your tax liability, and be a game-changer for your business. It allows you to receive a credit on a portion of the Social Security and Medicare taxes that you pay on behalf of your employees who receive tips, up to a maximum of 7.65% of their tips.
To qualify for the FICA Tax Tip Credit, a business must meet several criteria:
Your business must have employees who receive tips
As an employer, you must have paid Social Security and Medicare taxes on those tips
The tips must be reported to you by your employees
The credit may only be applied to tips that exceed the amount that brings the employee’s wage up to the federal minimum wage, which is set at $5.15
Tips are an attractive income enhancement for many employees in the hospitality industry, and the FICA Tax Tip Credit can be a significant tax savings for businesses that retain employees who earn tips. By providing an incentive to employers for having tip earning positions on their payroll, the credit helps businesses create job opportunities and put income back into the community.
Work Opportunity Tax Credit (WOTC)
The Work Opportunity Tax Credit (WOTC) is another tax credit that helps businesses and the communities they serve. The credit is available to businesses that hire employees from certain targeted groups who face barriers to employment, such as veterans, ex-felons, and individuals who receive government assistance.
The credit is equal to a percentage of the wages paid to the employee during the first year of employment, up to a maximum of $9,600 per employee. The percentage of the credit varies depending on the targeted group the employee belongs to.
To qualify for the WOTC, the employee must meet the following criteria:
They must be a member of a targeted group
They must work at least 120 hours for the employer
The employer must submit additional forms to the state workforce agency within 28 days of the employee’s start date
The WOTC can be a win-win for employers and employees. Employers can save money on their taxes while providing job opportunities to individuals from the surrounding community who may have difficulty finding employment.
Research and Development Credit
The Research and Development (R&D) Tax Credit is available to businesses that invest in research and development activities. The federal credit is designed to encourage businesses to invest in innovation and technology, which can lead to new products, processes, and services.
The credit is equal to a percentage of the qualified research expenses (QREs) incurred by the business during the tax year. QREs include wages paid to employees who perform research and development activities, supplies used in the research and development process, and contract research expenses.
To qualify for the R&D Tax Credit, the business must meet the following criteria:
The research and development activities must be intended to create new or improved products, processes, or services
The activities must involve a process of experimentation
The activities must be technological in nature
The activities must be conducted in the United States
The R&D Tax Credit can be a significant tax saving for businesses that invest in research and development, and by encouraging investment in additional economic activity, including the hiring of outside firms, it helps create economic activity and growth in the community.
Incentify Helps Business Identify Tax Credits and Incentives that are Good for the Community
Identifying and applying for these valuable tax credits is not something that all businesses can easily do. As the nation’s leading enterprise tax credits & incentives (C&I) platform, Incentify is uniquely capable of helping business owners determine their eligibility for these and many other tax credits. The software company’s innovative cloud solution helps businesses of all sizes across diverse industries save valuable time and resources, and maximize their cash flow, by identifying and maximizing their eligibility for government C&I.
Incentify brings together companies, specialty advisors, and technology to help customers collaborate and engage in the discovery of credits and incentives. We combine technology with a team of C&I professionals to collect assessment documentation and connect you with top industry advisors who are best suited to discover and secure credit and incentive opportunities.
Through Incentify Discovery we will collect business information and unique economic data, and run the data through our C&I opportunity discovery engine to uncover every potential opportunity. We will determine potential C&I opportunities, like the FICA Tax Tip Credit, the Work Opportunity Tax Credit, and the Research and Development Tax Credit and many more. By taking advantage of these and other credits, businesses can save money on their taxes and increase profits, and perhaps most importantly, become a valuable economic partner in the community.
Contact Incentify today to find out more about how government C&I can help your business and the communities you serve.
About the Author:
Laurence Barral, Vice President of Product
Laurence Barral is an experienced product leader working with our engineering team to deliver and elevate the Incentify user experience. Her expertise lies in product vision, product launches, strategic planning, user experience, research, talent management, and coaching.
When she is not drawing workflows on whiteboards, she is spending her time with her family and friends traveling abroad. She is an avid runner and stand up paddle boarder. Laurence holds two masters degrees respectively in Economics and Human Resources Information Systems.