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February 21, 2024

Uncorking the Benefits: How the R&D Tax Credit Can Benefit Wineries, Breweries, and Distilleries

Uncorking the Benefits: How the R&D Tax Credit Can Benefit Wineries, Breweries, and Distilleries

In the innovative world of winemaking, brewing, and distilling, creativity and experimentation are not just passions—they’re business practices. For wineries, breweries, and distilleries, the Research & Development (R&D) Tax Credit offers a unique opportunity to turn these creative efforts into valuable financial advantages.

What is the R&D Tax Credit?

The Research & Development Tax Credit, initially established to encourage innovation across industries in the U.S., provides businesses with a way to reduce their tax liability for engaging in research and development activities. It’s designed to support companies that are developing new products or processes or improving existing ones.

Eligibility in the Fermentation Industry

Many activities common in wineries, breweries, and distilleries qualify for the Research & Development tax credit. This includes:

  • Developing new or improved flavors: Experimenting with different ingredients, aging processes, or fermentation methods.
  • Enhancing production processes: Innovating to increase efficiency, reduce waste, or improve safety.
  • Experimenting with sustainable practices: Developing environmentally-friendly production methods.
  • Quality testing and analysis: Conducting rigorous quality control and consistency assessments.

The Financial Benefits

Reduced Tax Liability

The most direct benefit of the R&D tax credit is a reduction in tax liability. If your winery, brewery, or distillery engages in qualifying activities, you can claim a percentage of related expenses, such as salaries, supplies, and contract research costs, directly against your taxes owed.

Encourages Innovation

The credit incentivizes ongoing innovation, allowing you to push boundaries in flavor, efficiency, and sustainability with a safety net of knowing some of these costs can be recouped.

Competitive Advantage

In a market that values novelty and quality, the ability to innovate continuously can set your business apart. The R&D tax credit effectively subsidizes experimentation, giving you a financial edge in the market.

Claiming the Credit

Navigating the R&D tax credit can be complex, involving strict documentation and specific IRS requirements. It’s often beneficial to work with a tax professional who can help identify qualifying activities and expenses and ensure that your claim is both maximized and compliant.

Conclusion

For wineries, breweries, and distilleries, the R&D tax credit isn’t just a tax benefit; it’s a catalyst for growth and innovation. By leveraging this credit, your business can continue to experiment and evolve, while enjoying the financial rewards of your creative endeavors.

Stay tuned for more insights into how your business can benefit from various tax credits and incentives.

Cheers to innovation and growth,

The Figure Financial Team

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February 7, 2024

TAX UPDATE: TAX RELIEF FOR AMERICAN FAMILIES AND WORKERS ACT OF 2024

I. Introduction

On January 31, 2024, the House passed the Tax Relief for American Families and Workers Act of 2024 (the “Act”); the Act is now off to the Senate and will hopefully receive a vote before their recess begins on February 12th.

The Act covers a variety of tax topics, including the child tax credit, the incremental research credit (more commonly known as the research and development (or R&D) credit), bonus depreciation, and the employee retention credit (or ERC). These specific topics will be discussed in more detail in this tax update.

II. Child Tax Credit Updates

Under the Act, the child tax credit—a tax credit to provide financial relief to caretakers of children and dependents for their care expenses—would be expanded and changed in various ways. For one, the refundable portion of the credit would be determined on a per-child (instead of per-taxpayer) basis. This change would apply for 2023, 2024, and 2025.

Additionally, the maximum amount of the refundable portion of the credit would be based on statutorily set amounts instead of inflation adjusted amounts. The maximum amount for 2023 (which is currently at $1,600) would instead be increased to $1,800, with additional $100 increases each for 2024 and 2025. The overall maximum amount of the credit will be adjusted for inflation for 2024 and 2025. It is currently set at $2,000.

III. R&D Credit Updates

The R&D credit provides a credit against qualified research expenses so that companies can invest in innovation and technological and economic growth. However, the impact of the R&D credit has been dampened by a requirement for the relevant expenses to be amortized over a five-year period for tax years after 2021, instead of immediately deducted. The Act would delay this rule until 2026.

IV. Bonus Depreciation Updates

In 2017, the Tax Cuts and Jobs Act expanded the bonus depreciation rules by allowing property placed in service between September 17, 2017 and December 31, 2022 to immediately receive 100% bonus depreciation. This rate was reduced by 20% for each tax year after 2022. The Act would extend the 100% bonus depreciation rate through 2025. After this, the rate would revert to what it would have been under the Tax Cuts and Jobs Act, i.e., 20% in 2026 and 0% in 2027.

IV. ERC Updates

    a. Immediate End to the ERC Program

The Act would end the ERC program as of January 31, 2024; if the Act is passed by the Senate, this ending would be retroactive. This program was created in response to the COVID-19 pandemic to assist certain employers who kept employees on the payroll even when their operations were fully or partially suspended, or their revenue significantly declined, during the pandemic. Currently, the ERC program is set to expire on April 15, 2024 (for 2020 claims) and April 15, 2025 (for 2021 claims).

Furthermore, the Act includes provisions related to ERC promoters (third-party processers of ERC claims); specifically, it significantly increases potential penalties such promoters could face for fraudulent claims, and it creates new disclosure requirements. This is in response to a large number of fraudulent ERC claims the IRS has become aware of that stem from third-party ERC companies, many of which are no longer even in business. These provisions will go a long way to assist employers who were taken advantage of during the ERC program’s run and hold ERC mills accountable for fraudulent actions.

The Act also extends the statute of limitations period for ERC claims to six years.

    b. The Voluntary Disclosure Program (VDP) for ERC Claims

With the end of the ERC program imminently approaching, and the IRS’s understandable interest in finding fraudulent claims, it is important to keep in mind another ERC-related program that the IRS announced at the end of last year: the Voluntary Disclosure Program (or VDP).

The VDP, which was announced in December 2023 with release of the IRS’s Announcement 2024-3, is a repayment program for those businesses “that filed for and erroneously received the ERC” in order to “resolve their civil tax liabilities…and avoid potential civil litigation, penalties, and interest.”

The VDP not only helps the taxpayer to avoid these consequences, it also allows the taxpayer to keep 20% of the ERC erroneously claimed. In other words, a taxpayer that enters into the VDP will only need to repay 80% of the credit they claimed.

To be eligible for the VDP, (i) the taxpayer cannot be under criminal investigation, (ii) the IRS cannot have information about the taxpayer’s noncompliance, (iii) the taxpayer cannot be under an employment tax examination, and (iv) the taxpayer cannot have previously received notice and demand for repayment of its ERC.

Time is of the essence for the VDP since its deadline is March 22, 2024. Not only that, but the IRS has announced it will be sending out at least 20,000 ERC disallowance letters (in addition to the ones it has already sent out in the recent past) to taxpayers who have already claimed the ERC. If a taxpayer receives one of these letters, they will no longer be eligible for the VDP.

This program, like any IRS program, has its nuances, which are best navigated by a tax professional. If a taxpayer goes into the program blind, they risk providing the IRS with more information than is necessary, which leaves them exposed. By entering into the VDP, a taxpayer does not make itself immune from criminal prosecution for fraud, nor does the IRS waive any of its rights to judicial review.

VI. Conclusion

With the expanded child tax credit and bonus depreciation rule, and the punting of the burdensome R&D amortization rule, the Act aims to provide much needed relief for American families and workers following the pandemic, inflation, and other overwhelming events in our country. However, by ending the ERC program early, the Act takes away the opportunity for eligible employers to receive a credit they had been promised but hadn’t yet been able to claim; though ending it early does save the government money and may give the IRS more time to sort through its backlog of ERC claims (and weed out fraudulent ones in the process).

All of the topics in this tax update are only some of those covered by the Act. If that showcases anything, it’s that tax bills are usually quite expansive, detailed, nuanced, and—even for some experts—confusing in their application. If any of these topics seem like they may be beneficial to you or your business, it is vital to get with a tax professional to help you work through them and get the best benefit you can get for your taxes.

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February 2, 2024

A Future-Proof Approach: Understanding Sustainable Financial Strategies for Growth

The business landscape is ever-changing, filled with uncertainties and fluctuations. In such a dynamic environment, a sustainable and future-proof financial strategy is essential for ongoing growth and stability. But what does a “future-proof” approach look like, and how can it be achieved? Let’s explore together.

What is a Future-Proof Financial Strategy?

A future-proof financial strategy refers to a long-term plan that enables a business to thrive amidst change and uncertainty. It’s not about predicting the future; it’s about preparing for it. Such a strategy recognizes potential risks and opportunities and provides the flexibility to adapt.

Key Elements of a Future-Proof Approach

  • Comprehensive Risk Management

Identifying, assessing, and managing risks is central to future-proofing. From market fluctuations to regulatory changes, understanding potential challenges allows for proactive measures.

  • Emphasizing Sustainability

Sustainability goes beyond environmental considerations. It includes financial sustainability, ensuring that growth is achievable and maintainable over the long term.

  • Agility and Adaptability

Markets change, and a future-proof strategy embraces this reality. Flexibility in decision-making and execution allows a business to pivot as needed.

  • Technological Integration

Incorporating technology not only enhances efficiency but also ensures that a business stays competitive in an increasingly digital world.

Building Your Future-Proof Strategy

  • Start with a Clear Vision

Define what success looks like for your business in the long term. Align your financial strategy with your overall business goals.

  • Engage in Scenario Planning

Consider various future scenarios, both positive and negative. Plan for different outcomes so that you’re prepared for whatever comes your way.

  • Foster Collaboration

Include various stakeholders in your planning process. Different perspectives can enrich the strategy and ensure alignment across the organization.

  • Monitor and Adjust

A future-proof strategy is never set in stone. Regularly review and adjust the plan as circumstances change.

  • Seeking Professional Guidance

Building a future-proof financial strategy can be complex. Consider seeking professional guidance from financial experts who can tailor a strategy to your specific needs and industry dynamics.

Conclusion

A future-proof approach to financial growth isn’t a luxury; it’s a necessity in today’s dynamic business environment. By emphasizing risk management, sustainability, agility, technological integration, and ongoing adaptation, you can build a financial strategy that not only withstands the winds of change but leverages them for growth.

At Figure Financial, we believe in empowering businesses to navigate the complexities of financial planning with confidence. Stay tuned for more insights to guide your path to sustained success.

The Figure Financial Team

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January 17, 2024

COVID-19 Tax Credit for 1099 & Self-Employed Business Owners

Calling all independent contractors and self-employed business owners! The Families First Coronavirus Response Act (FFCRA) was passed by Congress in April 2020 to provide financial support for self-employed individuals (sole proprietors, 1099 contractors, freelance workers, etc.). If you couldn’t work (including teleworking) due to certain COVID-19-related reasons, the FFCRA gives you a special credit to help out for missed earnings during those challenging times.

  • Were you self-employed or a 1099 contractor in 2020 or 2021?
  • Did you report net earnings on your Schedule SE?
  • Did you ever miss work because you or a family member were impacted by COVID-19? (See full list below of “IRS Guidelines for Qualifying Care”)

If you answered “Yes” to all of these questions, you may be entitled to a refundable tax credit and Figure Financial is here to help. We’ve designed a simple application process to estimate your tax credit, as follows:

  1. Complete a questionnaire to give us the dates you missed work due to qualified reasons and provide us copies of your 2019, 2020, and 2021 tax returns.
  2. Sign an agreement and pay a small deposit to have our tax experts calculate your exact qualified credit.
  3. We’ll review our findings with you, have you sign your amended return, and pay your filing fee.
  4. We’ll get the return filed and monitor its status with the IRS until your credit is issued.

Click here to start your FFCRA Application


APPLY NOW!

 

IRS Guidelines for Qualifying Care (Self, Child, or Others):

 

  • You were subject to a federal, state, or local quarantine or isolation order related to COVID-19.
  • You were advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  • You were experiencing symptoms of COVID-19 and seeking a medical diagnosis of COVID-19.
  • You were seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19.
  • You were exposed to COVID-19 or were unable to work pending the results of a test or diagnosis.
  • You were obtaining immunization related to COVID-19.
  • You were recovering from any injury, disability, illness, or condition related to such immunization.
  • You were caring for an individual who was subject to a federal, state, or local quarantine or isolation order related to COVID-19.
  • You were caring for an individual who had been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  • You were caring for a son or daughter because the school or place of care for that child was closed or the childcare provider for that child was unavailable due to COVID-19 precautions.
  • You were accompanying an individual to obtain immunization related to COVID-19.
  • You were caring for an individual who was recovering from any injury, disability, illness, or condition related to the immunization.
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January 5, 2024

Small Business Alert

Effective January 1, 2024, the Corporate Transparency Act (CTA) requires most business entities to file an initial report with the Financial Crimes Enforcement Network (FinCEN) to disclose the entity’s beneficial owners (a “BOI Report”). Entities that existed before January 1, 2024, have until January 1, 2025, to comply.

What does the new rule require?

The rule requires reporting companies to file reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity; and (2) the company applicants of the entity. Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

Is my company a “reporting company”?

The rule identifies two types of reporting companies: domestic and foreign. A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. Under the rule, and in keeping with the CTA, twenty-three types of entities are exempt from the definition of “reporting company.”

What information must be provided?

Generally, reporting companies must provide four pieces of information about each beneficial owner:

  • name;
  • date of birth;
  • address; and
  • the identifying number and issuer from either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used. An image of the document must also be submitted.

The company must also submit certain information about itself, such as its name(s) and address. In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”).

What’s the purpose of the new rule?

The rule will enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use and provide essential information to national security, intelligence, and law enforcement agencies; state, local, and Tribal officials; and financial institutions to help prevent drug traffickers, fraudsters, corrupt actors such as oligarchs, and proliferators from laundering or hiding money and other assets in the United States. Essentially, the goal is to eliminate the use of “shell” companies to hide illicit activities.

Does it cost anything to file?

No. FinCEN has created a website that is now live for free electronic filing: https://boiefiling.fincen.gov/

See the Small Entity Compliance Guide for more information: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

Also see: https://www.fincen.gov/news/news-releases/us-beneficial-ownership-information-registry-now-accepting-reports

The Figure Financial Team

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December 27, 2023

IRS Updates on the New ERC Voluntary Disclosure Program (VDP)

IRS Updates on the New ERC Voluntary Disclosure Program (VDP)
By Ashlee Hall, Esq., Director of Legal Services for Figure Financial, Inc.

More information on the new ERC Voluntary Disclosure Program (VDP) and the rights the IRS requires the taxpayer to give up in exchange. Taxpayers should never take the prospect of waiving rights to the government lightly or without seeking the advice of a tax advisor (preferably counsel), especially when it comes to the statute of limitations and disclosure of a financial position or the location of bank accounts. Let me explain…

⌛ Statute of Limitations

Taxpayers entering the program are required to sign and provide an extension of the SOL on 2020 ERC claims to April 15, 2025. This means the time for audit is extended for one year beyond the upcoming April 15, 2024, deadline, despite the taxpayer acting in good faith and requesting submission to the program. It does not appear the taxpayer’s consent is conditioned upon the IRS accepting the taxpayer’s application to the VDP program. Because this is a separate form, it seems like it could turn into a bait and switch if the taxpayer’s application is not approved. Visit this IRS FAQ pages for more information on the process: https://www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit-voluntary-disclosure-program#process

👩‍⚖️ The Right to Appeal

Participation in the VDP requires that you sign a closing statement. In doing so, a taxpayer waives the right to an appeal, which is a due process right.

💲 Disclosure of Financial Information

While those that the IRS accepts into the program will need to repay only 80% of the credit they received, employers unable to repay the required 80% of the credit in a lump sum may be considered for an installment agreement on a case-by-case basis, pending submission and review of a Form 433-B, Collection Information Statement for Businesses, and all required supporting documentation. I have a feeling many business owners will find themselves in this category.

Based on my extensive experience in tax controversy and IRS collections, taxpayers should not provide this form or enter into a payment agreement with the IRS before consulting a tax advisor. Note that as part of an installment agreement, the taxpayer will also have to include any amounts owing on other tax periods, which could complicate things for business owners currently in a difficult financial position.

Finally, you are not eligible for the VDP for any tax period where you’re entitled to some ERC because the program is only for tax periods in which no ERC is allowed. If you think you are entitled to keep some of your ERC refund, it’s time to consult a tax advisor to help you properly substantiate what you are entitled to keep.

The deadline is March 22, 2024, in high tax season no less, so it’s best to sort out these details now. My advice? Do not waive any rights or voluntarily submit to IRS collections by providing the requisite Collection Information Statement without consulting a tax lawyer.

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December 13, 2023

Seasonal Smarts: Leverage the Holidays for Tax and Finance Planning

Seasonal Smarts: Leverage the Holidays for Tax and Finance Planning

The holiday season, with its spirit of giving and reflection, is the perfect backdrop for some savvy financial planning. As the year winds down, taking a moment away from the festivities to focus on your taxes and finances can lead to substantial savings and a stronger financial position in the new year. Here’s how you can leverage the holiday season for smarter tax and finance planning.

Maximize Your Deductions

Charitable giving is synonymous with the holiday spirit, and it’s also a fantastic way to increase your tax deductions. Donating to a qualified charity before the year’s end can reduce your taxable income. Don’t forget to keep receipts and records of all donations.

Defer Income

If possible, defer bonuses or other income until after December 31st. This could lower your taxable income for the current year, potentially placing you in a lower tax bracket and decreasing your tax liability.

Spend Your FSA

Flexible Spending Accounts (FSAs) are use-it-or-lose-it. Make sure to spend these pre-tax dollars on qualifying medical expenses before time runs out. Schedule last-minute doctor’s visits or stock up on eligible supplies.

Harvest Losses

Check your investment portfolio for any underperforming stocks. Selling them can offset capital gains you’ve realized during the year, balancing out your tax implications through what’s known as tax-loss harvesting.

Plan for Retirement Contributions

Increase your retirement contributions if you haven’t already hit the yearly limit. Contributions to 401(k)s and traditional IRAs can be tax-deductible, lowering your taxable income.

Prepare for the Upcoming Tax Season

Use the downtime during the holidays to get organized for the tax season. Gather and file receipts, review your records, and start outlining your tax return early to avoid the rush in April.

Reassess Your Withholdings

If you had a major life change this year, such as marriage or a new child, adjust your withholding accordingly to avoid a surprise tax bill or suboptimal refund.

Invest in Energy Efficiency

If you’ve been considering home improvements, look into energy-efficient upgrades. Certain improvements may qualify for tax credits and can reduce your utility bills, too.

Conclusion

While the holidays are a time to relax and enjoy the company of loved ones, setting aside a little time for tax and financial planning can pay off. With these strategies, you can enter the new year with peace of mind and perhaps a little extra in your pocket.

Here’s to your financial health this holiday season,

The Figure Financial Team

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December 6, 2023

Year-End Strategies: Setting Up Your Business for Success in 2024

Year-End Strategies: Setting Up Your Business for Success in 2024

As the final quarter of the year unfolds, businesses are presented with a crucial opportunity to lay the groundwork for success in 2024. Q4 is not just about closing out the year; it’s about strategic positioning for the future. Let’s delve into essential activities that can propel your business forward into 2024.

  1. Financial Review and Reconciliation

    Before you can chart a course for the new year, you must understand where you stand financially. Conducting a thorough financial review and reconciliation helps identify the year’s successes and pain points. Examine your P&L statements, balance sheets, and cash flow statements. Ensure all financial transactions are accurately recorded and reconciled.

  2. Tax Planning and Optimization

    Year-end is critical for tax strategy. Consult with tax professionals to explore all opportunities for tax credits and deductions. Consider making charitable donations or purchasing necessary equipment to take advantage of tax breaks. Look at any changes in tax laws that could impact your business in 2024 and adjust your strategies accordingly.

  3. Budgeting and Forecasting

    Use the insights gained from your financial review to create a detailed budget for 2024. Consider market trends, economic forecasts, and your business goals when setting your budget. This activity should also include cash flow forecasting, which is pivotal for maintaining operational liquidity.

  4. Inventory Management

    For product-based businesses, Q4 is the time to assess inventory. Clear out old or outdated stock with year-end promotions and plan for inventory needs in the new year. Good inventory management can free up cash and storage space while ensuring you’re ready to meet customer demand.

  5. Strategic Planning Sessions

    Hold a strategic planning session with key team members. Review your business plan and revisit your long-term goals. Are your current strategies driving you toward those goals, or do adjustments need to be made? Lay out the initiatives and objectives for 2024, ensuring they are aligned with your overall vision.

  6. Employee Assessments and Development Plans

    Your employees are your greatest asset. End-of-year assessments allow you to provide feedback, set new goals, and discuss career progression. Invest in employee development plans to build a stronger team ready to tackle the challenges of 2024.

  7. Technology Upgrades and Security Checks

    As digital transformation continues to accelerate, assess your technology stack. Plan for any upgrades or implementations that can increase efficiency. Additionally, review your cybersecurity measures to protect your business from the growing threat of digital attacks.

  8. Customer Engagement and Feedback

    Engage with your customers to thank them for their business and to solicit feedback. Understanding their experience can reveal improvements or innovations for the upcoming year. Consider offering Q4 promotions to boost end-of-year sales and encourage customer loyalty.

  9. Vendor and Supply Chain Review

    Examine your supply chain for any potential disruptions or areas for cost savings. Strong relationships with vendors can lead to better terms and services, which will be crucial in navigating the uncertainties of 2024.

  10. Legal and Compliance Audit

    Ensure that your business remains compliant with all relevant laws and regulations. An end-of-year legal audit can help you avoid costly fines and legal troubles that could derail your 2024 plans.

Conclusion

By engaging in these Q4 activities, you’re not just closing out the current year; you’re stepping into 2024 with a clear vision and a strong foundation. Remember, the actions you take now can significantly influence your trajectory for the next year and beyond. Here’s to a prosperous and successful 2024!

Wishing you forward momentum,

The Figure Financial Team

 

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November 29, 2023

Leveraging Tax Credits for Strategic Tax Planning: A Guide for Small Businesses and Startups

Welcome to our latest blog post, where we delve into the world of strategic tax planning, focusing on how utilizing tax credits can lead to significant savings. As a specialty tax firm, we understand the complexities faced by small businesses and startups. Our specialty tax service is designed to navigate these challenges, ensuring that you make the most of the available tax credit savings.

Understanding Tax Credits in Your Tax Strategy

When it comes to creating a robust tax strategy, the importance of tax credits cannot be overstated. Unlike deductions, which reduce the amount of taxable income, tax credits directly reduce the amount of tax owed, dollar for dollar. This makes them a powerful tool in the arsenal of any small business or startup looking to minimize their tax liabilities and maximize their financial health.

How Tax Credits Can Benefit Small Businesses and Startups

  • Immediate Cash Flow Improvement: Tax credit savings provide immediate cash flow benefits, which can be crucial for the liquidity and operational flexibility of smaller businesses.
  • Encouraging Innovation and Growth: Certain tax credits are designed to encourage activities like research and development, a key area for startups and small businesses looking to innovate and grow.
  • Reducing Overall Tax Burden: By effectively utilizing tax credits, small businesses can significantly reduce their overall tax burden, freeing up capital that can be reinvested back into the business.
  • Leveling the Playing Field: Tax credits can level the playing field, giving small businesses and startups similar advantages to larger corporations that have more resources to dedicate to tax planning.

Navigating Tax Credits with a Specialty Tax Firm

Navigating the world of tax credits can be complex, with various eligibility criteria and application processes. This is where partnering with a specialty tax service becomes invaluable. A specialty tax firm can:

  • Identify Eligible Tax Credits: Different industries and activities qualify for different tax credits. Professional tax advisors can identify which credits your business can benefit from.
  • Ensure Compliance: Tax laws are continually evolving. A specialty tax firm stays abreast of these changes, ensuring that your business remains compliant while taking advantage of tax credit savings.
  • Maximize Savings: Professionals can help calculate and claim the maximum credits you are entitled to, which can be a nuanced process requiring in-depth knowledge.
  • Strategic Planning: Beyond the current year, a specialty tax firm can help integrate tax credits into your long-term strategic tax planning, aligning them with your business goals.

Conclusion

For small businesses and startups, tax credits are not just a way to reduce taxes; they are a strategic tool for growth and sustainability. Utilizing these credits effectively requires a comprehensive understanding of tax laws and an informed approach to tax planning. By partnering with a specialty tax firm, you can ensure that your business is not only compliant but also strategically positioned for financial success and growth.

Stay tuned to our blog for more insights into tax strategy and ways to optimize your financial journey.

The Figure Financial Team

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November 22, 2023

How Philanthropy Results in Smart Tax Savings

How Philanthropy Results in Smart Tax Savings

As the holiday season approaches, remember it is also the season of giving! Did you know your giving spirit can lead to smart tax savings? Here’s how:

  1. Charitable Deductions: Donate to qualified nonprofits and lower your taxable income, reducing your tax bill while supporting your passion.

Charitable donations can play a significant role in both your philanthropic endeavors and tax savings strategies. When you contribute to a qualified charitable organization, the IRS allows you to claim these donations as deductions on your income tax return, thus potentially lowering your taxable income. This incentivizes generosity by effectively reducing the net cost of your donation. The key is to ensure that the charity is recognized by the IRS, you itemize your deductions carefully, and maintain proper documentation of all contributions.

For corporations, charitable giving can also contribute to a reduced corporate income tax burden, aligning corporate social responsibility with financial planning. It’s important to consult with a tax professional to navigate the intricate regulations around charitable deductions and to optimize the benefits of your charitable contributions for both you and the recipients of your generosity.

2. Donor-Advised Funds (DAFs): Your philanthropic piggy bank! Contribute to DAFs, get a tax deduction, and grant to your favorite charities flexibly.

Donor-advised funds (DAFs) offer a strategic way to manage charitable giving with significant benefits. They serve as a tax-efficient investment account for philanthropy, allowing donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. This not only simplifies the giving process but also provides an opportunity to invest the contribution for tax-free growth, potentially increasing the impact of the donation. Furthermore, DAFs provide donors with the flexibility to time their contributions to match their financial and tax planning goals while also researching and deciding which charities to support at their leisure. They act as a valuable tool for individuals looking to create a structured giving plan without the administrative burdens associated with private foundations.

3. Appreciated Asset Donations: Give stocks, real estate, or assets. Avoid capital gains tax, get a deduction, and make a big impact!

Donating appreciated assets, such as stocks, to a qualified charity can yield substantial tax benefits. The most long-term appreciated stock in your portfolio is often the best to donate as it may offer the greatest potential tax benefit. Moreover, you may also be eligible for a tax deduction based on the asset’s fair market value at the time of the donation. This approach not only maximizes the donation’s value for the charity but also optimizes the donor’s financial and tax situation by potentially reducing their taxable income. Always consult with a tax advisor to ensure compliance with IRS rules and to fully understand the impact on your individual tax circumstances.

Remember, philanthropy isn’t just about giving—it’s also about making a positive impact on your community and the causes you care about. But knowing how it can align with your financial goals and reduce your tax burden is an added bonus!

Before making any significant charitable contributions, it’s a good idea to consult with a tax professional!

 

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November 15, 2023

Why Restaurants and Retail Shops Should Still Apply for the Employee Retention Credit (ERC)

Why Restaurants and Retail Shops Should Still Apply for the Employee Retention Credit (ERC)

In the aftermath of unprecedented challenges, restaurants and retail shops are looking for ways to stabilize and grow. One critical lifeline not to be overlooked is the Employee Retention Credit (ERC). Here’s why your business should consider applying if you haven’t already.

Cash Injection When It Counts

The ERC offers substantial tax credits for qualified wages paid to employees, providing a cash infusion that can be pivotal for businesses operating on razor-thin margins. This is not a loan; it’s a credit, meaning it doesn’t have to be repaid. For many, it can be the difference between staying afloat or not.

Offset COVID-19 Impacts

Many restaurants and retail stores continue to face the operational impacts of COVID-19. The ERC is specifically designed to offset these challenges, rewarding businesses that have retained their staff during hard times.

Broad Eligibility

The rules for ERC are specific, but the path to eligibility caters to a wide array of situations that might have impacted your business. Whether it was a full or partial suspension of operations due to government orders or a significant decline in gross receipts, the chances are that your restaurant or shop qualifies for some level of credit.

Retroactive Claims for Relief

Even if your business is back to pre-pandemic levels of operation, the ERC is claimed retroactively on amended payroll tax forms. If you didn’t take full advantage of the credit during eligible quarters, it’s not too late to claim what you are owed. The credit for 2020 will be expiring in April 2024, so now is the perfect time to file a claim.

Support for Future Resilience

Beyond providing immediate financial relief, the ERC can strengthen your business’s long-term resilience. While ERC funds can be used for anything, if used to offset your payroll, it can help maintain a loyal and experienced workforce, ready to help your business grow.

Conclusion

While the worst of the pandemic may be behind us, the economic impact lingers. The ERC is a valuable opportunity for restaurants and retail shops to regain their footing and push forward. Don’t leave this money on the table – it could be the support your business needs to thrive in the coming year.

Until next time,

The Figure Financial Team

 

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November 8, 2023

ERC Substantiation: What is it, and what is required?

By Ashlee Hall, Esq., Director of Legal Services for Figure Financial, Inc.

Substantiation

noun

  1. evidence sufficient to establish a thing as true, valid, or real; proof.

Black’s Law Dictionary defines “substantiation” as “support of a claim or assentation by objective data or other proof of evidence.” In other words, substantiation equals documentation. In short, PROOF. In the ERC context, substantiation means documentation that supports the business’s eligibility position, qualified wage methodology, and credit calculation, among other things.

About a year after the ERC came into existence, the IRS released Notice 2021-20, which outlined the requirements to properly substantiate an ERC claim. This guidance, summarized in relevant part below, can also be used as a roadmap for what to expect in an IRS audit.

Although the IRS has set forth very specific guidance on the substantiation required for ERC claims, there are many business owners who filed an ERC claim but failed to adequately substantiate eligibility, either due to poor (or no) advice by their tax provider or simply a failure to understand these requirements. Notably, the IRS does not require any sort of substantiation – or proof – of eligibility for the credit upon filing. This has resulted in many ERC claims being paid to which the business owner was not entitled.

What is required?

According to the IRS, an eligible employer will adequately substantiate eligibility for the employee retention credit if the employer creates and maintains records that include the following information.

  • Documentation to show how the employer determined it was an eligible employer that paid qualified wages, including:
    • any governmental order to suspend the employer’s business operations;
    • any records the employer relied upon to determine whether more than a nominal portion of its operations were suspended due to a governmental order or whether a governmental order had more than a nominal effect on its business operations;
    • any records the employer used to determine it had experienced a significant decline in gross receipts;
    • any records of which employees received qualified wages and in what amounts; and
    • in the case of a large eligible employer, work records and documentation showing that wages were paid for time an employee was not providing services.
  • Documentation to show how the employer determined the amount of allocable qualified health plan expenses.
  • Documentation related to the determination of whether the employer is a member of an aggregated group treated as a single employer for purposes of the employee retention credit and, if so, how the aggregation affects the determination and allocation of the credit.
  • Copies of any completed Forms 7200 that the employer submitted to the IRS.
  • Copies of the completed federal employment tax returns that the employer submitted to the IRS (or, for employers that use third-party payers to meet their employment tax obligations, records of information provided to the third-party payer regarding the employer’s entitlement to the credit claimed on the federal employment tax return).

What should business owners do if they do not have these documents?

 It is very important for business owners to gather these documents before the IRS initiates an audit. So far in the audits we have seen, the initial document request aligns with the guidance summarized above. Time is of the essence, as the further we get from the pandemic, the more likely it is that these documents may not be available, either from the business or from the government. For example, we have noticed that many jurisdictions remove governmental orders from their websites as time goes on and administrations change. Unless the tax provider archived governmental orders as we have, business owners that relied on the governmental order test to meet eligibility requirements but failed to save those orders could be out of luck.

How long should a business owner keep substantiation documents?

 The IRS noted in its guidance that business owners should keep these documents and have them available for review in the event of an IRS audit for at least four years.

Sources: www.dictionary.com; Black’s Law Dictionary; IRS Notice 2021-20

#ERC #ERCsubstantiation #IRScompliance #taxcredit #taxcreditstrategy

 

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November 1, 2023

Ensuring Compliance in ERC Claims: The Critical Need for Substantiation

In the realm of Employee Retention Credit (ERC) claims, compliance is not just a legal obligation; it’s a cornerstone of ethical business practice. With the rise in ERC filings, there’s a growing need for businesses to understand the importance of substantiating their claims, especially when suspicions of fraud arise.

Understanding ERC Compliance

The ERC, designed to provide financial relief to businesses retaining employees during challenging economic times, comes with specific eligibility criteria. Compliance means adhering to these criteria and accurately reporting your claim. It’s crucial to remember that the IRS scrutinizes these claims closely, and any discrepancy, whether intentional or not, can lead to severe penalties.

The Risk of Fraudulent Claims

Unfortunately, the opportunity for significant tax relief can tempt some businesses into stretching the truth on their ERC claims. However, the risks of fraudulent claims are substantial – including fines, legal repercussions, and damage to your business’s reputation. It’s a high price to pay for short-term gain.

Importance of Substantiating ERC Claims

Substantiation is the process of providing evidence that your ERC claim is valid and compliant. This involves:

  1. Documenting Eligibility: Clearly show how your business meets the ERC eligibility criteria. This includes evidence of reduced business operations or a significant decline in gross receipts.
  2. Detailed Payroll Records: Maintain meticulous payroll records to prove the wages paid to employees during the eligible periods.
  3. Consistent Financial Reporting: Ensure that your financial statements and reports consistently reflect the information in your ERC claim.
  4. Seeking Professional Guidance: Working with tax professionals can help ensure that your claim is both maximized and compliant

Handling Suspected Fraudulent Claims

If your business faces allegations of a fraudulent ERC claim, it’s crucial to:

  1. Act Promptly: Address the situation immediately. Delaying can compound the problem.
  2. Consult Legal and Tax Advisors: Engage with professionals who can guide you through the process of rectifying the claim and dealing with legal implications.
  3. Cooperate with Authorities: If an investigation occurs, fully cooperate with the IRS or other authorities.
  4. Implement Stronger Controls: Use this experience to implement stronger internal controls and compliance checks for future claims.

Conclusion

In conclusion, while the ERC offers valuable financial relief, it comes with a responsibility to uphold the highest standards of compliance. Substantiating your ERC claim is not just about avoiding penalties; it’s about affirming your commitment to ethical business practices. Remember, a short-term gain is not worth the long-term risks of non-compliance.

Stay informed and compliant, and your business can confidently benefit from the relief intended by the ERC.

The Figure Financial Team

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October 25, 2023

IRS Announces Withdrawal Process for Erroneous ERC Claims

Last week the IRS announced a new option for taxpayers to withdraw pending Employee Retention Credit (ERC) claims. This option is limited to businesses with pending ERC filings with the IRS, or for any refund check that has not been cashed yet. While this new process will likely not apply to any of our clients because of our robust quality control process each file goes through before any credit is filed, read on to learn about our response to this news.

ERC Fraud on the Rise

Due to the rise in fraudulent ERC claims being filed, last month the IRS (formally) announced a pause to the processing of new claims through the end of the year. This moratorium has been put into place to allow the IRS to conduct thorough compliance reviews and to ultimately protect small business owners who may have been scammed by aggressive fraudsters looking to capitalize on ERC. Even though the IRS formally announced this moratorium, hitting “pause” is a common practice by the IRS. We have seen the IRS hit pause on the ERC program previously by slowing claims processing, for example, only without a formal announcement.

The new withdrawal program announced last week was created as a solution for taxpayers who believe they were scammed in order to avoid any future penalty. The withdrawal program is for those who:

  • have not received their refund check, or
  • received the check but have not deposited it yet

Since this program is new for taxpayers and the IRS alike, now is the time to rely on the expertise at Figure Financial. With our team of tax lawyers with years of experience navigating the often-confusing (sometimes scary!) world of IRS audits and collections, we know how to traverse these waters. Let us be the guide!

Our Process for Withdrawal Inquiries

Since the withdrawal program is intended to be limited to those business owners who believe they were scammed, we don’t anticipate our clients needing to submit to the withdrawal process. We stand behind our work and are confident in our team’s adherence to statutory and IRS rules for the program.

For any clients requesting reassurance about their claim, a call with our leadership team can be scheduled here:

Schedule Here

 

Figure’s Solution = ERC Substantiation

Fortunately for us at Figure Financial, this IRS news is only fuel to the ERC Substantiation fire. With our top-tier team of tax attorneys, CPAs and Certified Tax Coaches, we see this as opportunity to provide value and peace of mind to both new and existing clients by ensuring your ERC eligibility is compliant with IRS rules. Whether it’s ERC Substantiation or Audit Defense services, we are here for the long haul.

Start ERC Substantiation Process

#employeeretentioncredit #ERC #ERCsubstantiation #IRScompliance #tawlaw #taxcreditlaw

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October 18, 2023

Investing in Your Employees: Exploring Tax Incentives for Employee Training and Development

Employees are often referred to as a company’s most valuable asset. Investing in their training and development not only enhances productivity but also fosters loyalty and improves retention. Did you know that there might be tax incentives available for businesses that invest in employee growth? Let’s explore this exciting opportunity.

1. The Importance of Employee Training and DevelopmentA. Enhancing Skills and Competencies

      1. Continuous learning ensures that employees stay up-to-date with industry trends and technologies, enhancing their skills and competencies.

B. Boosting Employee Engagement

      1. Investment in training reflects a commitment to employees, boosting their engagement, satisfaction, and loyalty.

C. Improving Performance

      1. Well-trained employees often lead to increased efficiency, innovation, and overall business performance.

2. Tax Incentives for Employee Training

Several countries and states offer tax incentives to businesses that invest in employee training and development. These incentives can significantly offset the costs involved.

A. Federal Credits and Deductions

      1. Depending on your location, there may be federal tax credits or deductions specifically tied to employee education and training.

B. State-Specific Incentives

      1. Some states provide additional tax incentives for businesses that engage in workforce development. It’s wise to consult with a local tax professional to explore what’s available in your jurisdiction.

C. Grants and Subsidies

      1. In addition to tax credits, government grants and subsidies may be available to support employee training initiatives.

3. How to Access These Incentives

A. Understand the Requirements

      1. Each tax incentive comes with specific requirements and criteria. Understanding these is the first step towards claiming them.

B. Keep Detailed Records

      1. Maintaining comprehensive records of training activities, costs, and outcomes is vital when applying for tax incentives.

C. Consult with Professionals

      1. Tax laws can be complex. Consider engaging a tax professional or CPA familiar with training-related tax incentives in your area.

4. Planning Training with Tax Incentives in Mind

Aligning your employee training strategy with available tax incentives can maximize benefits. Consider the following:

A. Strategic Alignment

      1. Ensure that the training aligns with your business strategy and meets the criteria for available incentives.

B. Regular Monitoring

      1. Keep an eye on legislative changes that may affect available tax incentives.

C. Integration into Overall Tax Strategy

    1. Incorporate employee training incentives into your broader tax planning for optimal benefits.

Conclusion
Investing in employee training and development is more than just a good business practice; it can also provide tangible financial benefits through tax incentives. With thoughtful planning and execution, you can enhance your team’s skills while enjoying fiscal rewards.
At Figure Financial, we’re here to guide businesses through the complexities of tax planning, including leveraging opportunities like training incentives. Stay tuned for more insights to help your business thrive.
The Figure Financial Team

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October 11, 2023

The Importance of Financial Health Checkups: Assessing Your Business’s Fiscal Fitness

Just as we require regular medical checkups to assess our physical well-being, a business requires regular financial health checkups to maintain its fiscal fitness. Understanding the financial condition of your business helps to identify strengths, weaknesses, opportunities, and potential risks. Let’s explore the importance of financial health checkups and how to go about them.

1. What is a Financial Health Checkup?

    1. A financial health checkup involves a comprehensive examination of a company’s financial statements, key metrics, cash flow, and overall financial practices. It’s about understanding how healthy the business is financially, where it’s thriving, and where it needs attention.

2. Why is a Financial Health Checkup Essential?A. Early Detection of Problems

      1. Much like in our health, early detection of financial issues can prevent small problems from growing into major crises.

B. Strategic Planning

      1. With a clear understanding of financial health, strategic planning becomes more focused and effective.

C. Investor and Lender Confidence

      1. A regular financial health checkup reflects well on your business, inspiring confidence in investors and lenders.

D. Opportunity Identification

      1. Sometimes, a health checkup reveals hidden opportunities for growth or areas where efficiency can be improved.

3. Key Areas to Assess

A. Liquidity Ratios

      1. Assess how well the business can meet its short-term obligations.

B. Profitability Metrics

      1. Understand your profit margins, return on assets, and other indicators of financial success.

C. Debt Management

      1. Analyze the company’s debt situation to ensure it’s manageable and aligned with the business’s growth strategy.

D. Cash Flow Analysis

      1. Understanding cash flow is vital for operational sustainability and growth.

4. Conducting the Checkup

While some businesses conduct financial health checkups internally, many engage financial professionals for an unbiased assessment. Whether you choose to go it alone or hire professionals, here’s what to consider:

A. Regularity

      1. Financial health checkups should be a regular part of your business routine, whether monthly, quarterly, or annually.

B. Comprehensive Analysis

      1. Don’t just focus on one or two aspects; look at the full financial picture.

C. Actionable Insights

    1. Translate the findings of the checkup into actionable insights and strategies.

Conclusion

Regular financial health checkups are an investment in the long-term well-being of your business. They provide a crucial understanding of where your business stands financially, offering clarity and control in an ever-changing business landscape.
At Figure Financial, we are committed to helping businesses stay fiscally fit and ready for what the future holds.
Stay tuned for more insights and guidance on the path to financial success.

The Figure Financial Team

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September 27, 2023

Family Business Finances: Unique Strategies and Considerations for Family-Owned Entities

Family businesses are the backbone of many economies, often bringing together multiple generations under a shared vision and values. However, their very strength, the familial connection, can lead to unique financial challenges and opportunities. Let’s explore some key strategies and considerations specifically tailored for family-owned entities.

1. Balancing Business and Family Needs

    1. Family businesses must carefully balance family and business interests. This includes defining clear boundaries between personal and professional finances and relationships.

A. Setting Clear Financial Boundaries

      1. Creating distinct lines between family and business finances helps in maintaining professional integrity and managing resources effectively.

B. Implementing Fair Compensation Policies

      1. Ensuring that family members are compensated fairly, based on roles and contributions, can prevent conflicts and ensure equity.

2. Succession Planning

Family businesses often thrive across generations. However, this requires thoughtful planning.

A. Early Planning

      1. Starting the planning process early ensures that a clear path is laid out for future leadership transitions.

B. Involvement of Family Members

      1. Engaging all relevant family members in succession planning fosters open communication and collaboration.

3. Tax Considerations

Family-owned entities often face unique tax situations. Proper planning can help in minimizing tax liabilities.

A. Gifting and Estate Planning

      1. Strategic gifting within the family can be a way to pass wealth while managing tax obligations.

B. Utilizing Family Trusts

      1. Family trusts can be powerful tools for managing assets and tax planning.

4. Leveraging Family Strengths

Family businesses often possess unique strengths, such as shared values, loyalty, and long-term commitment.

A. Building on Shared Vision

      1. A common vision can unite family members, driving collaboration and success.

B. Emphasizing Values in Branding

    1. Many consumers appreciate the values and traditions that often accompany family businesses. Leveraging this in marketing can be a powerful tool.

Conclusion

Managing finances in a family business involves unique dynamics that require tailored strategies. From balancing family and business needs to succession planning and leveraging family strengths, each aspect requires thoughtfulness and care.

At Figure Financial, we understand the nuances of family business finance and are here to assist in crafting strategies that uphold family values while driving business success.

The Figure Financial Team

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September 22, 2023

From Start-Up to Success: Financial Strategies for Growing Businesses

Starting a business is an exciting endeavor, but growing that business into a successful enterprise requires careful planning and execution. Financial strategies are at the heart of this growth, guiding a start-up through various stages of development. Let’s explore some key financial strategies that can help turn a fledgling start-up into a flourishing success.

  1. Understanding Growth Stages

Every business evolves through different stages, each with unique financial needs and challenges:

  1. Launch Phase

Here, the focus is on setting up the business, securing initial funding, and beginning operations.

  1. Growth Phase

This phase involves expanding, reaching new markets, and scaling operations.

  1. Maturity Phase

At this stage, the business focuses on maintaining growth, streamlining operations, and enhancing profitability.

  1. Essential Financial Strategies for Growth

  2. Robust Financial Planning

Creating a detailed financial plan that aligns with business goals is vital. It should include projections, budgets, and a clear roadmap for financial management.

  1. Efficient Cash Flow Management

Managing cash flow is essential for business growth. Monitoring receivables, controlling expenses, and maintaining a cash reserve are all critical elements in cash flow management that work together to prevent liquidity crises.

  1. Consideration of Financing Options

Growing businesses often need additional capital. Exploring different financing options, including loans, investors, and grants, ensures funds are available when needed.

  1. Investing in Technology

Implementing financial software and technology can provide real-time insights, enhance efficiency, and facilitate informed decision-making.

  1. Focus on Compliance

Compliance with tax laws, regulations, and industry standards is essential to avoid legal complications that could hinder growth.

  1. Employee Development

Investing in employees ensures that the team has the skills and motivation to contribute to the company’s growth.

  1. Navigating Growth Challenges

Growth often comes with challenges. Understanding potential pitfalls and planning for them can make the journey smoother:

  1. Balancing Growth and Profitability

Fast growth can sometimes lead to financial strain. Striking the right balance between growth and profitability is key.

  1. Managing Risk

Identifying and mitigating potential risks, whether operational, financial, or market-related, can prevent unforeseen setbacks.

  1. Building Strong Relationships

Maintaining good relationships with suppliers, customers, and other stakeholders supports growth by fostering trust and collaboration.

  1. Seeking Professional Assistance

Engaging financial professionals with experience in growing businesses can provide valuable insights, guidance, and support throughout the growth journey.

Conclusion

Transforming a start-up into a successful business is a multifaceted process. A strategic financial approach, tailored to the specific stage and needs of the business, is vital for sustainable growth. From planning and cash management to compliance and relationship building, every aspect of financial strategy contributes to success.

At Figure Financial, we are passionate about supporting businesses at every stage of growth. Stay tuned for more insights and guidance to help your business reach its full potential.

The Figure Financial Team

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September 20, 2023

IRS Updates: IRS Pauses the Processing of New ERC Claims  

The IRS released updated guidance on the Employee Retention Credit program on September 14, 2023. The news release below explains that the IRS has placed an immediate moratorium through the end of the year on the processing of new ERC claims in effort to curb fraudulent applications by bad actors. While a moratorium may sound alarming, this intentional pause is a common practice used by the IRS.

This is a developing situation, and we will continue to provide updates as new information is released. This what we know so far:

    1. • This news confirms that the ERC is still a valid and valuable tax incentive for qualified businesses – this is not a cancellation of the program.

 

    1. • The IRS moratorium will delay taxpayers from receiving their ERC funds, but it does not prevent taxpayers from continuing to file for the credit.

 

    1. • The IRS may ask for more information to process future ERC claims, which we are prepared to provide as it is already part of our normal substantiation process.

 

    1. • We will only release a credit for your business if we are confident you meet the IRS requirements. The positions we take are in line with the updated guidance that the IRS has provided.

 

    1. • A large portion of the businesses we evaluate for ERC do not meet IRS eligibility requirements. If we filed a credit on your behalf, it is because we are confident you qualify. You should not be concerned about the credits you have claimed. The positions we have taken continue to be in line with the updated guidance that the IRS has provided.

 

    • The IRS is taking steps to help taxpayers remediate any inappropriately claimed credits in good faith. The IRS encourages taxpayers to evaluate their eligibility for the credit. If you know anyone concerned with a credit they claimed individually or through a company other than ERC Pros, we can offer assistance through our ERC Substantiation Services.

The IRS has not yet provided total clarity on how things will unfold in the coming months, but our team of attorneys and CPAs is closely monitoring the situation.

https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros#:~:text=WASHINGTON%20%E2%80%94%20Amid%20rising%20concerns%20about,small%20business%20owners%20from%20scams.

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September 13, 2023

The Importance of Financial Health Checkups: Assessing Your Business’s Fiscal Fitness

Just as we require regular medical checkups to assess our physical well-being, a business requires regular financial health checkups to maintain its fiscal fitness. Understanding the financial condition of your business helps to identify strengths, weaknesses, opportunities, and potential risks. Let’s explore the importance of financial health checkups and how to go about them.

What is a Financial Health Checkup?

A financial health checkup involves a comprehensive examination of a company’s financial statements, key metrics, cash flow, and overall financial practices. It’s about understanding how healthy the business is financially, where it’s thriving, and where it needs attention.

Why is a Financial Health Checkup Essential?

  • Early Detection of Problems

Much like in our health, early detection of financial issues can prevent small problems from growing into major crises.

  • Strategic Planning

With a clear understanding of financial health, strategic planning becomes more focused and effective.

  • Investor and Lender Confidence

A regular financial health checkup reflects well on your business, inspiring confidence in investors and lenders.

  • Opportunity Identification

Sometimes, a health checkup reveals hidden opportunities for growth or areas where efficiency can be improved.

Key Areas to Assess

  • Liquidity Ratios

Assess how well the business can meet its short-term obligations.

  • Profitability Metrics

Understand your profit margins, return on assets, and other indicators of financial success.

  • Debt Management

Analyze the company’s debt situation to ensure it’s manageable and aligned with the business’s growth strategy.

  • Cash Flow Analysis

Understanding cash flow is vital for operational sustainability and growth.

  • Conducting the Checkup

While some businesses conduct financial health checkups internally, many engage financial professionals for an unbiased assessment. Whether you choose to go it alone or hire professionals, here’s what to consider:

  • Regularity

Financial health checkups should be a regular part of your business routine, whether monthly, quarterly, or annually.

  • Comprehensive Analysis

Don’t just focus on one or two aspects; look at the full financial picture.

  • Actionable Insights

Translate the findings of the checkup into actionable insights and strategies.

Conclusion

Regular financial health checkups are an investment in the long-term well-being of your business. They provide a crucial understanding of where your business stands financially, offering clarity and control in an ever-changing business landscape.

At Figure Financial, we are committed to helping businesses stay fiscally fit and ready for what the future holds.

Stay tuned for more insights and guidance on the path to financial success.

The Figure Financial Team

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September 6, 2023

Family Business Finances: Unique Strategies and Considerations for Family-Owned Entities

Family businesses are the backbone of many economies, often bringing together multiple generations under a shared vision and values. However, their very strength, the familial connection, can lead to unique financial challenges and opportunities. Let’s explore some key strategies and considerations specifically tailored for family-owned entities.

Balancing Business and Family Needs

Family businesses must carefully balance family and business interests. This includes defining clear boundaries between personal and professional finances and relationships.

Setting Clear Financial Boundaries

Creating distinct lines between family and business finances helps in maintaining professional integrity and managing resources effectively.

Implementing Fair Compensation Policies

Ensuring that family members are compensated fairly, based on roles and contributions, can prevent conflicts and ensure equity.

Succession Planning

Family businesses often thrive across generations. However, this requires thoughtful planning.

Early Planning

Starting the planning process early ensures that a clear path is laid out for future leadership transitions.

Involvement of Family Members

Engaging all relevant family members in succession planning fosters open communication and collaboration.

Tax Considerations

Family-owned entities often face unique tax situations. Proper planning can help in minimizing tax liabilities.

Gifting and Estate Planning

Strategic gifting within the family can be a way to pass wealth while managing tax obligations.

Utilizing Family Trusts

Family trusts can be powerful tools for managing assets and tax planning.

Leveraging Family Strengths

Family businesses often possess unique strengths, such as shared values, loyalty, and long-term commitment.

Building on Shared Vision

A common vision can unite family members, driving collaboration and success.

Emphasizing Values in Branding

Many consumers appreciate the values and traditions that often accompany family businesses. Leveraging this in marketing can be a powerful tool.

Conclusion

Managing finances in a family business involves unique dynamics that require tailored strategies. From balancing family and business needs to succession planning and leveraging family strengths, each aspect requires thoughtfulness and care.

At Figure Financial, we understand the nuances of family business finance and are here to assist in crafting strategies that uphold family values while driving business success.

The Figure Financial Team

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August 30, 2023

A Future-Proof Approach: Understanding Sustainable Financial Strategies for Growth

The business landscape is ever-changing, filled with uncertainties and fluctuations. In such a dynamic environment, a sustainable and future-proof financial strategy is essential for ongoing growth and stability. But what does a “future-proof” approach look like, and how can it be achieved? Let’s explore together.

What is a Future-Proof Financial Strategy?

A future-proof financial strategy refers to a long-term plan that enables a business to thrive amidst change and uncertainty. It’s not about predicting the future; it’s about preparing for it. Such a strategy recognizes potential risks and opportunities and provides the flexibility to adapt.

Key Elements of a Future-Proof Approach

  • Comprehensive Risk Management

Identifying, assessing, and managing risks is central to future-proofing. From market fluctuations to regulatory changes, understanding potential challenges allows for proactive measures.

  • Emphasizing Sustainability

Sustainability goes beyond environmental considerations. It includes financial sustainability, ensuring that growth is achievable and maintainable over the long term.

  • Agility and Adaptability

Markets change, and a future-proof strategy embraces this reality. Flexibility in decision-making and execution allows a business to pivot as needed.

  • Technological Integration

Incorporating technology not only enhances efficiency but also ensures that a business stays competitive in an increasingly digital world.

Building Your Future-Proof Strategy

  • Start with a Clear Vision

Define what success looks like for your business in the long term. Align your financial strategy with your overall business goals.

  • Engage in Scenario Planning

Consider various future scenarios, both positive and negative. Plan for different outcomes so that you’re prepared for whatever comes your way.

  • Foster Collaboration

Include various stakeholders in your planning process. Different perspectives can enrich the strategy and ensure alignment across the organization.

  • Monitor and Adjust

A future-proof strategy is never set in stone. Regularly review and adjust the plan as circumstances change.

  • Seeking Professional Guidance

Building a future-proof financial strategy can be complex. Consider seeking professional guidance from financial experts who can tailor a strategy to your specific needs and industry dynamics.

Conclusion

A future-proof approach to financial growth isn’t a luxury; it’s a necessity in today’s dynamic business environment. By emphasizing risk management, sustainability, agility, technological integration, and ongoing adaptation, you can build a financial strategy that not only withstands the winds of change but leverages them for growth.

At Figure Financial, we believe in empowering businesses to navigate the complexities of financial planning with confidence. Stay tuned for more insights to guide your path to sustained success.

The Figure Financial Team

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August 23, 2023

Simplifying the Complex: A Comprehensive Guide to Tax Credits for Small Businesses

The world of tax credits can seem like a labyrinth, especially for small businesses where resources are often limited. Tax credits can significantly impact your bottom line, but how do you navigate this complex landscape? Fear not, we’re here to simplify the complex. Let’s dive into a comprehensive guide to tax credits specifically tailored for small businesses.

  • Understanding Tax Credits

Tax credits are different from tax deductions. While deductions reduce your taxable income, credits directly reduce the tax you owe, dollar for dollar. This makes tax credits particularly valuable. Understanding what’s available to your business is the first step.

  • Common Tax Credits for Small Businesses

Here are some of the most common tax credits that small businesses can leverage:

  • Work Opportunity Tax Credit (WOTC): Hiring from certain target groups? This credit might be for you.
  • Small Business Health Care Tax Credit: Offering health insurance to employees? Don’t overlook this one.
  • Energy Efficiency Credits: Investing in energy-saving equipment? You could be rewarded.
  • How to Determine Eligibility

Each tax credit comes with specific requirements, and understanding whether your business is eligible can be tricky. Consult with a CPA or a tax professional to assess your business’s activities and expenditures against the criteria for each credit.

  • Documentation and Compliance

Documentation is crucial. Keeping thorough records of qualifying activities and expenditures is essential for claiming any credit. Maintain detailed records, and don’t hesitate to seek professional assistance to ensure compliance.

  • How to Claim the Credits

Tax credits are typically claimed through specific IRS forms filed with your tax return. Understanding which forms are required and how to fill them out is key. Engaging a tax professional can simplify this process and ensure accuracy.

  • Don’t Overlook State Credits

In addition to federal credits, many states offer their own tax credits. Investigate what’s available in your state, as these can add to your savings.

  • Planning for the Future

Consider tax credits in your long-term business planning. Aligning your business strategies with available credits can lead to ongoing financial benefits.

Conclusion

Navigating tax credits doesn’t have to be a perplexing journey. By understanding what’s available, determining your eligibility, keeping robust records, and seeking professional guidance, you can unlock valuable savings for your small business.

Remember, tax credits are not just for big corporations; small businesses have plenty to gain. Here at Figure Financial, we believe in empowering businesses of all sizes to thrive. Stay tuned for more financial insights to guide your journey.

The Figure Financial Team

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August 16, 2023

The Benefits of Developing a Long-Term Tax Credit Strategy with the Help of CPAs and Legal Attorneys

Tax credits offer a valuable opportunity for businesses to reduce their tax liabilities, but tapping into their full potential requires more than just a one-time effort. Developing a long-term tax credit strategy, with the guidance of Certified Public Accountants (CPAs) and legal attorneys, can bring sustained benefits. Let’s explore why this collaboration is so essential.

  • Understanding the Landscape

Tax laws are complex, and tax credits can be multifaceted. CPAs and legal attorneys bring specialized expertise in understanding the intricacies of tax codes, including various available credits like the R&D tax credit, Employee Retention Credit, and others. Their insights can help you navigate the landscape and identify the most beneficial opportunities for your business.

  • Customized Strategy

Every business is unique, and a one-size-fits-all approach to tax credits won’t cut it. CPAs and legal attorneys can work closely with your business to understand your specific needs, operations, and goals. They can then develop a long-term strategy tailored to your unique circumstances, ensuring optimal utilization of available tax credits.

  • Compliance and Documentation

Claiming tax credits requires meticulous documentation and adherence to specific legal requirements. CPAs and legal attorneys can guide you through the necessary documentation, ensuring that you have robust support for your claims. This not only strengthens your position in claiming credits but also prepares you for potential audits.

  • Continuous Monitoring and Adaptation

Tax laws and business environments are constantly changing. A long-term tax credit strategy must adapt to these changes to remain effective. With ongoing professional guidance from CPAs and legal attorneys, your strategy can be regularly reviewed and adjusted to reflect new opportunities, changes in laws, or shifts in your business operations.

  • Audit Defense

Should you face an audit, having a team of professionals who have been intimately involved in developing and executing your tax credit strategy can be invaluable. CPAs and legal attorneys can provide a strong defense, presenting your case and supporting documentation to authorities in a compelling manner.

  • Long-term Savings and Growth

By aligning your tax credit strategy with your long-term business goals, CPAs and legal attorneys can help you achieve sustained savings and growth. These consistent savings can be reinvested in your business, fueling further innovation, expansion, and success.

In conclusion, developing a long-term tax credit strategy with the collaboration of CPAs and legal attorneys offers a comprehensive approach to financial efficiency. It’s not just about claiming a credit today; it’s about building a roadmap to continuous financial optimization.

Stay tuned for more valuable financial insights.

The Figure Financial Team

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August 9, 2023

4 Reasons Why Your Business Should Hire Figure Financial for Tax Strategy and Tax Credit Solutions

Choosing the right partner for your financial needs is a pivotal decision. When it comes to tax strategy and tax credit solutions, Figure Financial stands out in the crowd. Here are four compelling reasons why your business should consider partnering with us:

  • Specialized Expertise

At Figure Financial, we’re not just generalists – we’re specialists in tax strategy and tax credit solutions. We understand the intricacies of tax laws, and we’re up-to-date with the ever-evolving tax landscape. We provide tailored strategies and solutions, ensuring that you maximize your tax savings and minimize your liabilities.

  • Proven Track Record

Our team boasts a strong track record of delivering substantial tax savings to businesses of all sizes and across various sectors. We’ve helped numerous businesses claim valuable tax credits like the R&D tax credit and the Employee Retention Credit, leading to improved financial health and prosperity.

  • Comprehensive Approach

We take a comprehensive approach to tax strategy. We don’t just focus on a single aspect of your business; we consider the whole picture. From income and expenses to investments and future plans, we analyze every aspect to develop a strategy that aligns with your business objectives and maximizes your financial efficiency.

  • Personalized Service

At Figure Financial, we believe in building lasting relationships with our clients. We provide personalized service, taking the time to understand your unique business needs and aspirations. We work alongside you, guiding you through each step of the process, ensuring transparency and maintaining constant communication.

Choosing Figure Financial means choosing expertise, experience, comprehensive solutions, and personalized service. We invite you to explore the benefits we can bring to your business’s financial health and success.

Stay tuned for more valuable financial insights.

The Figure Financial Team

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August 2, 2023

The Role of Legal Attorneys in Preparing and Filing Your R&D Tax Credit Claim

The R&D tax credit is a powerful tool for businesses investing in innovation, but it can be a complex landscape to navigate. This is where legal professionals can play a pivotal role, aiding in the preparation and filing of your R&D tax credit claim.

Decoding the Complexities

The R&D tax credit, while lucrative, comes with a host of stipulations and complexities. Understanding the IRS’s Four-Part Test, identifying qualifying research expenses, and substantiating your claim with appropriate documentation can be daunting tasks. This is where legal attorneys can provide critical assistance.

Assessing Eligibilities

A legal attorney with expertise in tax law can assist in assessing your company’s eligibility for the R&D tax credit. They can interpret complex IRS regulations, and apply them to your specific activities and expenditures, to determine if you meet the necessary requirements.

Identifying Qualifying Expenses

Legal attorneys can help identify all qualifying R&D expenses, including wages, supplies, and contract research costs. This ensures you claim the maximum possible credit.

Documentation and Substantiation

Adequate documentation is essential to support an R&D tax credit claim. Legal attorneys can advise on what documentation is required, how to gather it, and how to present it effectively. They can also help establish processes for continuous and systematic documentation in future years.

Filing the Claim

Legal attorneys can assist in correctly filling out the necessary IRS forms and ensure your claim is filed accurately and on time. Their expertise can help avoid errors that might delay your claim or trigger an audit.

Audit Defense

Should your claim be selected for an IRS audit, having a legal attorney who is familiar with your claim can be invaluable. They can provide a robust defense, articulating the validity of your claim and presenting supporting documentation effectively.

In conclusion, while it is possible to prepare and file an R&D tax credit claim without legal assistance, the role of legal attorneys can be instrumental in maximizing your claim and mitigating risks. Their expertise can bring both peace of mind and significant financial benefit.

Stay tuned for more valuable financial insights.

The Figure Financial Team

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July 26, 2023

The Interplay Between R&D Tax Credits and Patent Strategy: A Hidden Synergy

In the quest for financial efficiency, businesses often overlook the synergy between different areas of operation. One such overlooked synergy lies in the interplay between R&D tax credits and patent strategy. This hidden synergy can greatly enhance the return on your innovation investments. Let’s delve into this intricate dance.

Understanding the Dancers

Before exploring the interplay, let’s understand the individual elements:

 

 

    : These are incentives offered by the government to encourage companies to invest in research and development. They allow for a dollar-for-dollar reduction in your company’s tax liability, based on qualifying R&D expenses.

  1. Patent Strategy: This is the process of obtaining and leveraging patents to protect your company’s innovative products or processes, giving you a competitive advantage in the marketplace.

The Dance of Synergy

R&D tax credits and a well-executed patent strategy can feed off each other, creating a beneficial cycle of innovation and protection. Here’s how:

  1. Fueling Innovation: R&D tax credits can be reinvested in the company to grow and fund further innovation.
  2. Protecting Innovations: Once a patentable product or process is developed, a solid patent strategy can help protect your innovation from competitors. This strengthens your company’s market position and could lead to increased revenues.
  3. Substantiating R&D Claims: A patent for your projects can help substantiate all of the direct, supervisory, and supporting activities for your R&D tax credit claim. Further, the Patent Safe Harbor Rule states that a patent inherently satisfies three parts of the four-part test required to qualify R&D activities.

The interplay between R&D tax credits and patent strategy creates a hidden synergy that can significantly boost your company’s innovation potential and financial efficiency. Understanding this interplay is essential to making the most of your innovation investments.

For more insights on leveraging financial strategies, stay tuned.

Best,

The Figure Financial Team

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July 19, 2023

Staying Ahead of the Curve: Planning your Tax Strategy for the Next Fiscal Year

Tax season may seem like a recurring event that pops up once a year, but the reality is that tax planning should be an ongoing process. Staying ahead of the curve by planning your tax strategy for the next fiscal year can provide significant benefits, ensuring you’re prepared and proactive rather than reactive when tax time rolls around.

Importance of Tax Planning

Why is tax planning essential? It allows you to forecast your tax liability for the upcoming year, giving you ample time to implement strategies that could minimize your tax burden and optimize your financial situation. Also, by understanding potential tax liabilities ahead of time, you can manage your cash flow more effectively and avoid surprises.

Planning Your Strategy

How do you plan your tax strategy for the next fiscal year? Here are a few steps to get you started:

  1. Review the Past: The first step in planning for the future is to understand the past. Review your tax return from the previous year to understand your income sources, deductions, and credits.
  2. Forecast Income and Expenses: Based on your business plans and market conditions, forecast your income and expenses for the next year. Remember, changes in your business operations, such as expansion or downsizing, could significantly impact your tax situation.
  3. Understand Tax Law Changes: Tax laws change frequently. Stay informed about the latest changes that could impact your business. This could involve anything from new deductions and credits to changes in tax rates.
  4. Seek Professional Advice: A tax professional can provide valuable insights and recommendations for tax planning based on their knowledge and experience.
  5. Implement and Adjust: Once you’ve outlined your strategy, implement it. But remember, tax planning is not a set-it-and-forget-it exercise. Monitor your plan regularly and adjust as needed to accommodate changes in your business or tax laws.

Staying ahead of the curve through proactive tax planning is a wise business move. It provides peace of mind, financial efficiency, and more control over your business’s financial future.

Stay tuned for more insightful financial discussions.

Best,
The Figure Financial Team

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July 12, 2023

Understanding the Impact of Tax Strategies on your Bottom Line

The key to financial success lies not just in how much money your business makes, but also in how effectively it manages expenses, including taxes. An effective tax strategy can significantly impact your bottom line, leading to improved profitability and financial stability.

The Power of Tax Strategies

At first glance, taxes may seem like a fixed cost that businesses have little control over. However, the tax code is filled with numerous provisions that, when utilized strategically, can lead to substantial tax savings. These savings directly impact your bottom line by reducing your overall tax liability and freeing up capital that can be reinvested in your business.

Key Elements of a Successful Tax Strategy

  1. Tax Deductions: Identify all potential deductions your business qualifies for, from office expenses to employee wages, to reduce your taxable income.
  2. Tax Credits: Leverage tax credits like the R&D tax credit or the ERC to reduce your tax bill dollar for dollar.
  3. Tax-Advantaged Accounts: Utilize tax-advantaged accounts like a 401(k) or HSA to defer taxation and compound your savings.
  4. Timing of Income and Expenses: Consider the timing of income and expenses to take advantage of lower tax rates or defer tax liability.

Impact on Bottom Line

The result of these strategies is a lower tax bill and increased net income. For example, a business that leverages tax credits can reduce its tax liability by thousands, if not tens of thousands, of dollars. This directly increases its profitability.

Moreover, a well-executed tax strategy can help your business achieve its financial goals more quickly by freeing up capital for reinvestment. It also provides a cushion against unforeseen expenses or economic downturns, adding to your business’s financial stability.

In conclusion, understanding and implementing effective tax strategies is crucial to enhancing your bottom line. Consider working with a tax professional to optimize your tax strategy and unlock the full potential of tax savings.

Stay tuned for more valuable financial insights.

Best,

The Figure Financial Team

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June 28, 2023

Five Common Misconceptions about the Employee Retention Credit

In the whirlwind of information surrounding pandemic-era relief measures, the Employee Retention Credit (ERC) has emerged as a beacon of assistance for businesses navigating these challenging times. However, misconceptions about the ERC can cause businesses to overlook or underestimate this valuable tax credit. Let’s debunk five common misconceptions about the ERC.

1. Misconception: ERC is Only for Big Businesses

This is far from the truth. The ERC was designed to benefit businesses of all sizes, from small local shops to large corporations. Whether you have one employee or one thousand, if you meet the eligibility criteria, the ERC can offer significant financial relief.

2. Misconception: If You Receive PPP, You Can’t Get ERC

Initially, under the CARES Act, businesses were not allowed to “double-dip” by claiming both the Paycheck Protection Program (PPP) loan and the ERC. However, the Consolidated Appropriations Act of 2021 changed this, allowing businesses to benefit from both programs provided that the same wages were not used. By allowing businesses to access both programs for different sets of expenses, they could potentially maximaize their financial assistance and relief.

3. Misconception: Your Business Must Be Closed to Qualify

While businesses that were forced to fully or partially shut down due to government orders may qualify for the ERC, that’s not the only way to qualify. Businesses that experienced a significant decline in gross receipts compared to the same quarter in 2019 can also be eligible.

4. Misconception: The ERC is Difficult to Claim

While the process of claiming the ERC involves careful calculation and detailed record-keeping, it’s not insurmountably difficult. Resources and guidance are available from the IRS, and tax professionals can provide expert assistance.

5. Misconception: The ERC Isn’t Worth Much

On the contrary, the ERC can be substantial. In 2021, it equals 70% of up to $10,000 in qualified wages per employee for each quarter. That’s a potential credit of $7,000 per employee per quarter.

Misconceptions can create unnecessary barriers to valuable relief measures like the ERC. By debunking these myths, we aim to help businesses fully leverage the financial aid available to them.

Stay tuned for more informative financial discussions.

The Figure Financial Team

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June 21, 2023

The Art of Balancing: Combining R&D Tax Credits and Direct Funding for Optimal Gain

Funding innovation and research can be a complex puzzle, especially when you’re trying to maximize financial efficiency. Thankfully, the solution often lies in a balancing act: combining R&D tax credits with direct funding sources. This strategy can create a powerful synergy that fuels growth while optimizing financial gain.

Understanding the Pieces

Before we dive into the balancing act, let’s understand the individual components:

  1. R&D Tax Credits: These are government incentives designed to encourage companies to invest in innovation. These tax credits can offer dollar-for-dollar reduction in your company’s tax liability, based on your qualifying R&D expenses.
  2. Direct Funding: This includes grants, contracts, or cooperative agreements from government agencies and other organizations. These sources provide funds directly to your business for research and development activities.

Striking the Balance

Balancing these two funding avenues requires careful planning and strategy. Here’s how:

  1. Optimize Tax Credit Claims: Make the most of your R&D tax credits. Identify all eligible expenses to maximize your claim, including wages, supplies, and contract research expenses.
  2. Leverage Direct Funding Opportunities: Stay informed about direct funding opportunities that align with your business objectives. Apply for relevant grants or contracts that can cover a part of your R&D costs.
  3. Coordinate and Collaborate: It’s essential to ensure that there’s no ‘double-dipping.’ This means that expenses reimbursed by direct funding cannot be claimed as part of your R&D tax credit. This requires strategic allocation of costs and clear documentation.

Reap the Benefits

When balanced effectively, the combination of R&D Tax Credits and direct funding can significantly boost your company’s R&D potential. This strategy optimizes financial efficiency, helping to sustain and drive innovation.
The art of balancing these avenues is not always straightforward. Consider engaging a tax professional who can guide you through the intricacies of R&D tax credits and direct funding sources.

Remember, strategic financial planning is crucial to turning innovative ideas into profitable realities. Stay tuned for more insights on achieving optimal financial gain.

Best,
The Figure Financial Team

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June 14, 2023

Decoding the ERC: How to Navigate and Optimize Employee Retention Credits

In challenging times, a strong financial foundation is essential for businesses, and one such financial pillar is the Employee Retention Credit (ERC). If you’re a business owner, this blog will help you decode the ERC and navigate its benefits optimally.

The ERC is a refundable tax credit under the CARES Act designed to encourage businesses to keep employees on their payroll during a financial crisis. It applies to qualified wages paid to employees, including certain health care costs. In essence, it’s a helping hand for businesses to tide over difficult periods while maintaining their workforce intact.

Decoding the ERC involves understanding its key components:

  1. Eligibility Criteria: Businesses that either fully or partially suspended operation due to government orders related to COVID-19, or that experienced a significant decline in gross receipts compared to the same quarter in 2019, may qualify.

  2. Qualified Wages: These depend on your average number of employees. For businesses with 100 or fewer full-time employees, all employee wages qualify. For larger businesses, only the wages of employees who aren’t providing services due to the business suspension or decline in gross receipts qualify.

  3. Credit Calculation: The ERC equals 70% of up to $10,000 in qualified wages per employee for each quarter. Thus, you can receive up to $7,000 per employee per quarter in 2021.

To optimize the ERC, consider these tips:

  • Maintain Detailed Records: Good record-keeping is crucial for substantiating eligibility for the ERC. Track the impact of governmental orders on your operations and retain documentation on your payroll and employee count.

  • Seek Professional Advice: Navigating the nuances of the ERC can be tricky. Consult with a tax professional to ensure you’re maximizing this credit and complying with IRS rules.

  • Stay Updated: Tax rules evolve, especially during times of crisis. Keep yourself updated with changes to ensure you aren’t missing out on any opportunities.

In conclusion, the ERC can be a vital lifeline during turbulent times. Understanding, navigating, and optimizing it can make a significant difference to your business’s bottom line.

Stay tuned for more helpful financial insights.

Best,
The Figure Financial Team

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June 7, 2023

Innovation Pays Off: Unveiling the Potential of R&D Tax Credits

The creative journey of innovation is exciting and rewarding in many ways. But did you know, in addition to revolutionizing your business and industry, innovation could also bring significant tax benefits? That’s right – the Research & Development (R&D) tax credits can help offset some of the costs of your innovation process.

A Peek into R&D Tax Credits

The R&D tax credit is a government incentive designed to reward U.S. companies for increasing their research activities. The credit, available to firms of all sizes in a variety of industries, is a dollar-for-dollar reduction of a company’s income tax liability.

The goal is to encourage innovation and keep R&D jobs in the U.S., boosting the economy and keeping us competitive on the global stage. The credit is not just for rocket scientists or pharmaceutical pioneers; it is available for businesses across the spectrum, from software developers to food manufacturers.

Unveiling the Potential

To unveil the potential of R&D tax credits, we need to understand what qualifies as R&D. The IRS uses a four-part test to determine the eligibility:

  1. Elimination of Uncertainty: Did the effort aim to eliminate uncertainty about the development or improvement of a product or process?
  2. Process of Experimentation: Did the process involve formulating, testing, and modifying hypotheses through experimentation?
  3. Technological in Nature: Was the process of experimentation technological in nature, relying on principles of the physical or biological sciences, engineering, or computer science?
  4. Qualified Purpose: Was the intention of the process to improve functionality, performance, reliability, or quality?

If your business activities meet these criteria, your innovation could potentially reduce your tax bill!

The Bottom Line

R&D tax credits are a potential treasure trove for innovative companies but are often overlooked due to misunderstanding or misinformation. By identifying qualifying activities and expenses, you can make a substantial impact on your company’s financial health and fuel further innovation.

Remember, the government is essentially offering a reward for your ingenuity. It’s time to claim that reward, foster your innovation, and let your creativity reap financial benefits.

Stay tuned for more enlightening financial insights and discussions.

The Figure Financial Team

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May 24, 2023

Strategic Tax Planning: Why it Matters and How to Do It Right

Figure Financial Friends,

Do you think of tax planning only when the tax season is looming on the horizon? If so, you might be missing out on valuable opportunities to minimize your tax liability and maximize your financial potential. Strategic tax planning is an ongoing process, and it can make a significant difference in your wealth accumulation over time.

Understanding Strategic Tax Planning

Strategic tax planning is not about finding quick loopholes or evading taxes. Rather, it is about understanding the tax laws and leveraging them to align with your financial goals. It involves making the best use of the deductions, credits, exemptions, and structures offered in the tax code to reduce your tax liability.

Why Strategic Tax Planning Matters

Effective tax planning can result in considerable savings, contributing to your wealth accumulation over the long term. Additionally, it provides clarity about your financial situation, making it easier for you to plan for the future. Finally, it ensures that you are compliant with the tax laws, reducing the risk of penalties and late fees.

How to Do It Right

Effective tax planning requires a clear understanding of your financial situation and goals, knowledge of the tax laws, and an ability to plan ahead. Here’s a step-by-step guide:

  1. Understand Your Financial Situation: Begin by reviewing your income sources, expenses, investments, and financial goals. This will give you a clear understanding of your potential tax liabilities and the planning opportunities available to you.
  2. Know the Tax Laws: Tax laws are complex and ever-changing. You need to stay updated on the latest changes that could affect your financial situation. This could be a new tax legislation, an updated deduction, or a revised tax credit.
  3. Leverage Deductions and Credits: Make the most of the deductions and credits available to you. This could include expenses related to home offices, education, healthcare, and more. You might also qualify for various tax credits based on your situation.
  4. Plan Ahead: Tax planning is not a once-a-year activity. It requires regular reviews and adjustments based on changes in your financial situation and tax laws.
  5. Seek Professional Help: Given the complexity of tax laws, it’s wise to seek the help of a tax professional. They can provide personalized advice tailored to your situation and ensure that you are fully compliant with the tax laws.

Strategic tax planning is an essential part of managing your financial health. With the right approach, you can reduce your tax liability, save more, and have a clearer understanding of your financial future.

Stay tuned for more insights into the world of strategic financial management.

The Figure Financial Team

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May 17, 2023

The Employee Retention Credit: A Lifeline for Businesses in Troubled Times

Running a business isn’t a walk in the park, especially in times of uncertainty. One of the significant challenges is retaining your workforce. That’s where the Employee Retention Credit (ERC) comes into play. It’s a refundable tax credit designed to encourage eligible employers to keep employees on their payroll despite experiencing an economic hardship related to COVID-19.

So, how does it work? The ERC is a percentage of up to $5,000 per employee in 2020, and $7,000 per employee, per quarter (excluding Q4), in 2021 for qualified wages. This credit is refundable, which means if it exceeds the employer’s total liability of the portion of Social Security tax for all employees in any calendar quarter, the excess is refunded to the employer.

The qualification criteria can be complex, considering factors like government orders fully or partially suspending operations, and significant declines in gross receipts. You need to evaluate whether your business falls under these criteria.

The rules surrounding the ERC are continually evolving, and understanding the ins and outs can be a daunting task. Working with a tax professional can help you take full advantage of this lifeline while ensuring compliance with the changing laws. Remember, the objective isn’t just about financial survival but also maintaining the heartbeat of your business – your employees.

Stay tuned for more insights on navigating the complex world of tax credits.

The Figure Financial Team

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May 10, 2023

Maximizing your Benefits: A Comprehensive Guide to the Research & Development Tax Credit

Are you aware that the money you invest in developing new products, improving existing ones, or enhancing manufacturing processes can potentially cut your tax bill? This is made possible by the Research & Development (R&D) Tax Credit, a government initiative aimed at fostering innovation and growth.

So what is the R&D tax credit? Essentially, it’s a general business tax credit under Internal Revenue Code Section 41 for companies that incur research and development (R&D) costs in the U.S. And here’s the catch: many businesses carrying out qualifying activities remain unaware of this potential boon. They either misunderstand or overlook the credit, leading to significant unrealized tax savings.

To start, determine your eligibility. The R&D tax credit is not just for scientists or tech companies. Any business creating or improving products, processes, or software could be eligible.

The IRS has established a four-part test that individual companies must apply to their business activities on a project basis to determine eligibility:

  1. Elimination of Uncertainty: You must demonstrate that you’ve attempted to eliminate uncertainty about the development or improvement of a product or process.
  2. Process of Experimentation: You must engage in a process of experimentation to address the technological uncertainty. This typically involves conducting systematic trial and error processes, testing different approaches, evaluating alternatives, and applying scientific principles or methodologies.
  3. Technological in Nature: The activity performed must fundamentally rely on principles of physical or biological science; engineering; or computer science.
  4. Qualified Purpose: The purpose of the research must aim to create new (or improve existing) functionality, performance, reliability, or quality of a business component.

The benefits can be substantial, but claiming them requires precise documentation of eligible activities and expenses. Work with a tax professional to ensure you maximize your R&D Credit while staying compliant with IRS rules. Remember, the goal is not just to minimize your tax liability but also to fuel your company’s growth and innovation.

Stay tuned for more informative content on maximizing your financial benefits.

The Figure Financial Team

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May 3, 2023

Understanding Specialty Tax Services: A Simplified Guide

Navigating through the complexities of taxes can often feel like traversing through a labyrinth with an elusive exit. It’s an integral part of our financial lives, yet it remains shrouded in mystery for many. That’s where specialty tax services come into play. These are tailored services designed to help you understand and make the most of the often overlooked tax nuances. Let’s take a deeper dive into what these services entail and how they can potentially transform your financial outlook.

What are Specialty Tax Services?

Imagine this – instead of feeling overwhelmed each tax season, you feel in control, thanks to a team of experts that not only file your taxes but also guide you in understanding the specific areas where you could save money or grow your wealth. Specialty tax services can range from managing R&D tax credits and cost segregation studies to navigating through the intricate realms of international tax, estate planning, and more.

Benefits of Specialty Tax Services

Here’s the fun part (Yes, taxes can be fun, if you can believe it!). Here are the three primary benefits of specialty tax services:

  1. Savings: With a clear understanding of tax credits, deductions, and laws, specialty tax services can help you identify areas where you might save money. It’s like finding change in your couch cushions, but on a much grander scale.
  2. Strategy: Taxes aren’t just about the present year. Long-term tax planning can have significant effects on your wealth growth. It’s the strategic chess game of the financial world where planning three moves ahead can lead to a checkmate in your favor.
  3. Peace of Mind: Imagine less stress around tax season. Priceless, isn’t it? Specialty tax services take the guesswork out of the equation, providing you with a more precise roadmap.

Things to Consider

Like any financial decision, choosing to use specialty tax services should be considered carefully. The key is to find a reputable service provider who understands your financial situation and can tailor their approach accordingly.

  1. Expertise: Seek a service provider with a proven track record, the right credentials, and relevant experience. This expertise can prove invaluable in navigating the often tricky waters of tax planning.
  2. Communication: Look for a team that speaks your language (not just ‘tax’ language). Clear, open, and ongoing communication is vital to ensuring you understand your financial situation and how you can benefit from these services.
  3. Customization: Every individual, every business has unique needs and circumstances. Ensure your tax services provider can offer a tailored approach to suit your specific needs.

At the end of the day, understanding and efficiently managing taxes is an essential part of our financial health. Specialty tax services can be a useful tool, serving as both a lifeboat and a compass to guide you through the turbulent seas of the tax world. And remember, it’s not about evading the labyrinth, but mastering it.

Stay tuned to this space as we continue to demystify the complex world of finance, one blog at a time.

Until next time,
The Figure Financial Team

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Frequently Asked Questions

FAQs

Is the IRS cancelling the ERC program early?

The IRS released updated guidance on the Employee Retention Credit program on September 14, 2023. The news release below explains that the IRS has placed an immediate moratorium through the end of the year on the processing of new ERC claims in effort to curb fraudulent applications by bad actors. While a moratorium may sound alarming, this intentional pause is a common practice used by the IRS.

This is a developing situation, and we will continue to provide updates as new information is released. This what we know so far:

  • This news confirms that the ERC is still a valid and valuable tax incentive for qualified businesses – this is not a cancellation of the program.
  • The IRS moratorium will delay taxpayers from receiving their ERC funds, but it does not prevent taxpayers from continuing to file for the credit.
  • The IRS may ask for more information to process future ERC claims, which we are prepared to provide as it is already part of our normal substantiation process.
  • We will only release a credit for your business if we are confident you meet the IRS requirements. The positions we take are in line with the updated guidance that the IRS has provided.
  • A large portion of the businesses we evaluate for ERC do not meet IRS eligibility requirements. If we filed a credit on your behalf, it is because we are confident you qualify. You should not be concerned about the credits you have claimed. The positions we have taken continue to be in line with the updated guidance that the IRS has provided.
  • The IRS is taking steps to help taxpayers remediate any inappropriately claimed credits in good faith. The IRS encourages taxpayers to evaluate their eligibility for the credit. If you know anyone concerned with a credit they claimed individually or through a company other than ERC Pros, we can offer assistance through our ERC Substantiation Services.

On January 31, 2024, the House passed the Tax Relief for American Families and Workers Act of 2024, which proposed an end to the ERC program effective January 31, 2024. This is now pending approval from the Senate. Please note that we will not be processing any new ERC claims until a final vote is reached. Our team of attorneys and CPAs is closely monitoring the situation. For more information about this new legislation, read this Tax Update from our legal team on our blog.

Who can withdraw an ERC claim?

Employers for whom all of the following is true:

  • The claim was made on an amended employment return (Forms 941-X, 943-X, 944-X, CT-1X);
  • The amended employment return only added the claim for the ERC – no other adjustments were made;
  • The employer seeks to withdraw the entire amount of the ERC claim; and
  • The IRS had not paid the claim, or the check for the refund has not been cashed or deposited.
Who cannot withdraw an ERC claim?

Employers who have already cashed their refund checks or who claimed the ERC on their original employment tax return.

Why did the IRS create this withdrawal option?

The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims.

Why is this so important?

Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest, which can save you a lot of money.

How does an employer withdraw an ERC claim?
A: Review the instructions carefully at: Withdraw an Employee Retention Credit (ERC) claim | Internal Revenue Service (irs.gov) Section A: You haven’t received a refund and haven’t been notified your claim is under audit.
  • Make a copy of the adjusted return with the claim you wish to withdraw.
  • In the left margin of the first page, write “Withdrawn.”
  • In the right margin of the first page:
  • Have an authorized person sign and date it.
  • Write their name and title next to their signature.
  • Fax the signed copy of your return using your computer or mobile device to the IRS’s ERC claim withdrawal fax line at 855-738-7609. This is your withdrawal request. Keep your copy with your tax records. **If you can’t fax your withdrawal request, you can mail it to the address in the instructions for the adjusted return that applies to your business or organization. Before doing so you should make a copy of the signed and dated first page to keep for your records. It will take longer for the IRS to receive your request if you mail it. Mail your package via certified mail to track and confirm delivery.
Section B: You haven’t received a refund and you’ve been notified your claim is under audit. If you’ve been notified that the IRS is auditing the adjusted employment tax return that includes your ERC claim, prepare your withdrawal request using the steps in Section A, but don’t submit to the withdrawal fax line or mail it using the address below. Instead:
  • If you’ve been assigned an examiner, communicate with your examiner about how to submit your withdrawal request directly to them.
  • If you haven’t been assigned an examiner, respond to your audit notice with your withdrawal request, using the instructions in the notice for responding.
Section C: You received a refund check but haven’t cashed or deposited it.
  • Prepare the claim withdrawal request using the steps in Section A, but don’t fax the request.
  • Write “Void” in the endorsement section on the back of the refund check.
  • Include a note that says, “ERC Withdrawal” and briefly explain the reason for returning the refund check.
  • Make copies for your tax records of the front and back of the voided check, the explanation notes and the signed and dated withdrawal request page.
  • Don’t staple, bend, or paper clip the voided check; include it with your claim withdrawal request and mail it to the IRS at:

Cincinnati Refund Inquiry Unit

PO Box 145500

Mail Stop 536G

Cincinnati, OH 45250

**Mail your package via certified mail to track and confirm delivery.

What happens after submitting the withdraw request?

The IRS will send you a letter telling you whether your withdrawal request was accepted or rejected. Your approved request is not effective until you have your acceptance letter from the IRS. If your withdrawal is accepted, you may need to amend your income tax returns if you already included the claim for the ERC in the filing. If you need help, seek out a trusted tax professional.

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