Member of Russell Bedford International, a global network of independent professional service firms.
Member of Russell Bedford International, a global network of independent professional service firms.
Senior Tax Accountant
If you’re running a small or medium-sized business, you know that cash flow is everything. Keeping up with payroll, replenishing inventory, and funding growth can feel like a never-ending balancing act. But what if there was a hidden way to free up cash?
Enter tax credits. These aren’t just numbers on a financial statement; they’re tools that can give your cash flow the boost it needs. Let’s explore how you can unlock these hidden advantages and give your cash flow a much-needed boost.
Unlike tax deductions, which only reduce taxable income, tax credits directly cut down your tax bill. That means more money stays in your business, strengthening your financial position and fueling growth. Here are some key credits to consider:
Why It’s a Win: Hiring new employees doesn’t just build your team, it can also boost your cash flow. The WOTC rewards businesses for hiring individuals from specific target groups, such as veterans, individuals from low-income areas, and long-term unemployment recipients.
How It Works: You may be able to claim a tax credit for a percentage of an employee’s wages during their first year on the job. This can help offset hiring costs while reducing your tax liability.
How to Qualify: Hire employees who meet WOTC eligibility, submit a certification request during the hiring process, and maintain precise hiring and detailed payroll records.
Why It’s a Win: Innovation pays off, literally. If your business is developing new products, improving processes, or advancing technology, you may qualify for the R&D tax credit.
How It Works: You can claim a percentage of qualifying R&D expenses, including any wages and supplies involved with the research. This directly reduces your tax bill, making it a valuable incentive for businesses pushing the envelope in their industry.
How to Qualify: Keep detailed records of your R&D activities, including project descriptions, expenses, and outcomes to support your claim.
Why It’s a Win: Startups and smaller businesses don’t have enough income to benefit from the R&D tax credit, but there’s a workaround. The payroll tax credit allows eligible businesses apply up to $250,000 of their R&D credit toward their payroll taxes instead.
How It Works: This option provides cash flow relief right away rather than waiting to offset future tax liability.
How to Qualify: Meet startup eligibility criteria (typically having less than $5 million in gross receipts) and ensure your R&D activities meet the requirements. Accurate documentation of expenses is key.
Why It’s a Win: Certain industries, such as renewable energy, manufacturing, and tech—benefit from specialized tax credits to encourage innovation and sustainability. These credits reward activities like energy efficiency improvements, eco-friendly initiatives, and technological advancements.
How They Work: Whether you are upgrading to energy-efficient equipment or investing in new technologies or adopting eco-friendly practices, these incentives help cut your tax bill and boost your cash flow.
How to Qualify: Research the credits available in your industry and ensure compliance with all relevant requirements to make the most of these opportunities.
Claiming tax credits is just the beginning. Once you secure them, they can be a powerful tool in your financial strategy. Use the extra cash inflow to invest in growth opportunities, pay down debt, or build a financial cushion for the future. By incorporating tax credits into your planning, you are setting your business up for stability and success.
Tax credits could be the key to unlocking new financial opportunities for your business. If you’re ready to explore which credits apply to you, Cray Kaiser is here to help. As experienced advisors, we specialize in helping businesses navigate the complexities of tax credits.
