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April 2020

technology company tax burden

5 Ways Technology Companies Can Reduce Their Tax Burden

By | Innovation, Startup, Tax, Tax Credits | No Comments

Tax obligations are part and parcel of running a business. If your tech company is based in California, for instance, some of the taxes that you’ll have to pay include:

  • Income taxes
  • Employment taxes
  • Excise taxes

For years, tech companies have been slammed for failing to pay a fair share of taxes. However, it’s fallacious to make a blanket accusation to the effect that tech companies engage in tax evasion. Just like other businesses, these companies only devise ways of reducing their tax burden. 

From the local government to the IRS, tech executives should beware of all their tax obligations. This entails knowing how much tax you owe to different entities, when you should file, and the type of taxes that you ought to pay. Here are five strategies that a tech company can leverage to ease its tax burden.

1. Automating Tax Records

This sounds like a no-brainer, but some tech companies still take a casual and laidback approach to bookkeeping. Being proactive as far as bookkeeping is concerned could entail automating your records and books. Certain records are mandatory for you to take deductions. Without these records, expenditures might not be deductible. In this regard, here’s what you should consider doing:

  • Automate your books to track your company’s income and expenses. There are dozens of record-keeping programs that can help you do this.
  • Establish a file system to categorize your expenditure. Since some business expenditures are deductible, a system that categorizes your expenditure will help you determine and claim your tax relief.

2. Making Smart Tax Decisions

Under federal tax law, most business expenses are deductible. On the other hand, most income is taxable. Furthermore, the law also gives you options about when and to what extent you can report income or claim certain deductions. Being aware of these provisions can go a long way in helping you lessen your tax burden.

3. Staying Apprised of Law Changes

The American tax law constantly changes with significant legislation, IRS rulings, and court cases frequently emerging, thus altering the taxation landscape. Contrary to what you might think, these new developments are not meant to stifle your tech company. Instead, they present tax opportunities that you can leverage. Staying apprised with law changes can help you act on such opportunities.

For instance, in the aftermath of Hurricanes Wilma, Rita, and Katrina in 2005, several short-term tax breaks were enacted to benefit both individuals and corporations. By leveraging such opportunities when they arise, you’ll be able to lessen your tax burden significantly.

4. Contributing to Retirement Plans

Once your tech company breaks even, you should consider sheltering its income in a retirement plan that provides you with tax deductions for your contributions. The added benefit to this is that providing employees with such a savings opportunity helps you gain their loyalty. In the long-run, you’ll be able to tax on contributions until you start taking money from the retirement plan.

5. Structuring Your Business Appropriately

This is perhaps the most overlooked aspect of tax planning. Often, tech companies that start small fail to change their business structure as they scale. For instance, you can gain significant tax benefits by structuring your tech company as a C corporation rather than an S company or an LLC. When you structure your company as a C corporation, the initial $50,000 of its income will attract a 15% tax rather than a 35% tax.

The Incentax Advantage

Every business owner deserves a tax break. However, few of them know about opportunities that they can leverage to pay less tax. Moreover, you can avoid clashing with state and federal tax agencies by outsourcing the expertise of tax professionals. For top-notch tax consultation and advisory, contact us today.

covid19 tax credits

What You Need to Know About Covid-19 and Business Tax Credits

By | Tax Credits | No Comments

The COVID-19 crisis has led to government-imposed lockdowns throughout the world. It has significantly slowed down economic growth and led to massive job cuts. Despite the revenue losses experienced across all industries, companies are still required to fulfill their tax obligations.

The federal government has enacted The Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act to protect individual taxpayers and businesses from the devastating financial effects of the crisis.

State governments haven’t been left behind. In California, for instance, the state government has pledged to provide assistance to small businesses during the epidemic.

The advantages of these federal and state coronavirus-related tax relief policies include:

  • Additional time for handling tax-related matters
  • Quicker tax refunds
  • Temporary changes in tax audit policies to ensure quicker tax determination

Here’s an overview of the business tax credits that have been implemented to support companies amid the COVID-19 threat.

Employee Retention Credit

The CARES Act introduced the employee retention credit (ERC) that allows eligible employers to claim a tax credit against employment taxes for every calendar quarter for amounts equal to 50% of qualified wages per worker. This applies to a maximum of $10,000 in wages per employee per year. Generally, the ERC is limited to the employment taxes that are imposed on the wages. Any excess is regarded as a refundable overpayment.

Paid Sick Leave Refundable Credit

The Emergency Paid Sick Leave Act (EPSLA) requires eligible businesses to provide their workers with paid sick leave in case they are unable to work. Employees who are afflicted by the coronavirus are entitled to a two-week (80-hour) paid sick leave at their regular salary.

Eligible employers are entitled to a refundable tax credit that equals the paid sick leave. The tax credit also includes the employers’ share of Medicare tax that is imposed on those wages.

Paid Family Leave Tax Credit

Employees who are unable to work because they need to take care of a child whose place of care or school is closed are entitled to paid medical and family leave equivalent to two-thirds of their regular pay.

Eligible employers are entitled to a refundable tax credit that is equal to the paid medical or family leave. Besides, the tax credit includes the employers’ share of Medicare tax that is imposed on those wages as well as the cost of maintaining health insurance covers for the employees during the leave period. An eligible employer is defined as one who:

  • Was undertaking business during the 2020 calendar year
  • Concerning any other calendar quarter, the business activity got partially suspended due to government orders such as mandatory COVID-19 lockdowns that caused significant loss of income

Delay in The Payment of Payroll Taxes

The CARES Act allows self-employed individuals and employers to delay depositing their portion of social security tax and the 50% tax levied on self-employment income. However, 50% of the delayed payment ought to get deposited to the IRS next year, and the other 50% by the end of 2021. Businesses that are taking loans provided by the Small Business Act don’t qualify for this benefit.

Acceleration of AMT Tax Credits

The Tax Cuts and Jobs Act (TCJA) revoked the corporate alternative minimum tax (AMT). Nonetheless, it still allows for refundable AMT credits. This applies for taxable years 2018 to 2021. Under the CARES Act, businesses can accelerate the recovery of the AMT credits. This includes requesting a tentative reimbursement of such amounts before or on 31st December 2020.

As you can see, there are many business tax credits that can help keep your company afloat during the current COVID-19 pandemic. For more details about the refundable tax credits that you qualify for and how to make successful claims, contact the team at Incetax.

hiring startup

4 Essential Roles That Every Growing Startup Needs to Fill

By | Startup | No Comments

Your Growing Company

With any new tech startup, certain roles are a given. Engineers are essential. They fabricate and create the company’s salable products, bringing the founding partners’ ideas to life. So are tech officers and finance officers who drive the company’s infrastructure and assets forward. Of course, behind them all is the company’s founder, the person with the initial vision.

In the drive to establish your business and get all the macro-level pieces in place, it’s easy to lose sight of some of the smaller, often overlooked roles that your company also really needs to fill.

4 Essential Roles That You Need to Hire

1. Operations manager

When a tech startup first begins doing business, many of the founding members may find themselves in multiple roles, wearing multiple hats all at once. The CEO, for example, might find themselves doing triple duty as the lead product designer, chief operations officer, and salesperson all at the same time. But once the company has taken its first steps and found its footing, it is essential to differentiate some of those roles to ensure continued success.

First and foremost, your startup needs an operation manager: someone to impose order on the chaos and make work flow efficiently. A good operations manager is responsible for structuring the company’s day-to-day operations and determining the processes that will be important for the business’s overall culture and prosperity. An operations manager can alleviate the burden that these duties impose on the company officers and help you set the tone for your business practices going forward.

2. Sales development coordinator

The CEO, and even a good CFO to some extent, may have a burning passion for their product or the solution that they provide. People who are driven by that kind of passion can’t wait to share their vision with the business world at large. One person, however, is not a sales force. For your business to grow and thrive, it is essential to introduce your product to as many new markets and potential customers as possible.

A CEO can’t be everywhere at once though. For the startup to grow past infancy, you need more than just part-time salespeople. You also need someone who can open up new channels and opportunities, and build meaningful relationships with potential customers. A sales development coordinator can carve out leads for your salespeople to utilize.

3. Tech support

So you’ve created an excellent piece of software and captured a large share of business from a niche market. Sales are rolling in and the company is really starting to take off. While you know that your product is of the highest quality, occasional problems are inevitable. In the early days, the operations manager, or even the CEO, would help customers troubleshoot their issues, but the volume of your business prohibits that kind of thing at this point.

It’s time to hire tech support to make sure that your customers are getting maximum value from your product. Ensuring happy, well-educated clients means an increase in future business for you. Don’t forget to include tech support, or some form of customer service, into your business operations.

4. Writer/ marketing professional

This might be the single most overlooked role in a new tech startup. You design software. You create hardware. What does writing have to do with your company?

A good, competent writer is essential to your marketing, which in turn is essential to your continued growth. You would not believe the amount of copy and verbiage that needs to be established when setting up a new company. A writer needs to be able to create SEO (search engine optimized) content for your company website to ensure that it is easily found in search results. Tech manuals, training manuals, corporate vision statements, social media marketing, and sales campaigns all need someone to write them, and that person has to be clear, persuasive, and adaptable to their audience.

Tax Consultation with Incentax

You and your tech startup have the right products and the right level of passion. You’ve assembled a great team and put the right players into the correct roles. Your business is growing rapidly and successfully.

Now is the time to work with tax professionals like Incentax to help you develop the best strategic tax plan possible to ensure the prosperity of your business going forward. Please contact us today to set up a consultation and begin planning a deeper financial strategy for your growing startup. 

mixed-use property

6 Advantages to Mixed-Use Properties

By | Real Estate | No Comments

Changing Demographics and Changing Needs  

Every year the population in America’s most densely-packed cities continues to rise at a steady rate. People move into city centers in search of increased economic opportunities but often times at the cost of overcrowding. Making room for both businesses and people is a task akin to fitting a square peg in a round hole. Urban planners are tasked with making the whole thing work while investors and property owners seek the highest possible return on investment.

Mixed-use properties have seen a surge in popularity in recent years, and are a good solution to the problem of economic growth in highly populated areas. We’re going to look at both the societal and economic advantages to owning or developing a mixed-use property.  

What is a Mixed-Use Property?  

A mixed-use property combines the zoning requirements of both commercial and residential properties all in one. A mixed-use property is one with space specifically apportioned to both residential housing and commercial business space. Both types of zoning occur on the same property, often in different sections that are either adjacent to one another or vertically aligned with one another. For example, a mixed-use property may feature a restaurant, entertainment venue, or storefront with apartment space above.   

Other types of property zoning include:

  • Industrial
  • Agricultural
  • Historic
  • Rural
  • Aesthetic

What are the Advantages of Using Mixed-Use Properties?  

Mixed-use properties carry with them a set of culturally relevant and economic advantages. These factors often go hand-in-hand and influence one another.   

Stimulating growth in dense, urban regions  

Developing a mixed-use property is the perfect solution for real estate developers trying to maximize upon, and take full advantage of, the limited urban space available to them.  

It’s no secret that some of the most desirable real estate exists in heavily packed city centers. Real estate like this represents a significant economic investment. With Urban centers being so highly developed already, savvy investors and real estate professionals must search for ways to increase economic growth.  

Reduction of pollution and traffic  

Mixed-use properties also have a positive effect on the environment. This type of zoning more easily lends itself to foot traffic, neighborhood business, and a boost to the locally-driven economy. With all your amenities located adjacent to your home, the tangle of traffic is greatly reduced, as are hazardous carbon dioxide emissions due to a lower volume of vehicles requiring access.  

Convenience  

No discussion of mixed-use properties is complete without referencing convenience. The popularity of mixed-use property has gained steam on both ends of the age spectrum. Millennials and baby boomers alike find incredible value from the self-contained environment provided through mixed residential and commercial zoning. Mixed zones allow people with reduced or fixed incomes to stretch their dollars further by placing amenities in a close, accessible radius.   

Return on investment  

The advantages to a mixed-use property aren’t just social. Developers who build properties with both consumer and residential tenants in mind stand to increase the revenue that they receive from rent by a significant amount. Landlords are able to rent to businesses in many cases without the added consideration of rent control. This makes mixed-use properties more desirable because they represent a greater return on investment than single-use zoning does.  

Maximizing the local economy  

Keeping money circulating is central to any type of economy. If money and wealth are allowed to stagnate, that economy will fail. Tightly-knit communities that feature mixed-use properties encourage the local economy to flourish. Residents of mixed-use properties are more likely to spend their hard-earned dollars in local establishments adjacent to where they live than they are to travel outside of their communities. Business owners stand to profit greatly by investing in mixed-use buildings and thus tapping into strong local economies.  

Tax advantages  

Mixed-use properties also come with a significant tax advantage. Business owners are allowed to deduct depreciated assets to lower their tax burden. Commercial and residential properties depreciate at different rates. Commercial properties depreciate over a 39 year period, whereas residential properties only takes 27.5 years to fully depreciate. Under the correct criteria, a mixed-use property which features both commercial and residential sections is allowed to depreciate at the residential rate, adding a significant monetary incentive to wise investors.  

Consulting With Incentax  

Given the increasingly dense and populous nature of America’s urban centers, mixed-use properties just make good sense from a cultural, environmental, and economic point of view. There are numerous advantages that all point to levels of added value. Mixed-use properties expand the value of real estate in the areas of the country where the greatest concentration of wealth is centered. Incentax can help you discover additional avenues of tax advantage that come along with developing and owning mixed-use properties. Please contact us to schedule your tax consultation today.