We do not charge any upfront fees for refund checks for Employee Retention Credit or Sales Tax Refunds at MTRS. We bill for our services after the business receives a physical refund check, comparable to a contingency fee.
For the Research and Development Tax Credit this is automatically approved once your tax returns are filed for current year claims and we will bill you at the time of completion. At MTRS, our rates are extremely competitive and capped.
Examples of Industry’s that are eligible for sales tax advantages:
Then you are not liable for anything; our time and services are provided at our own risk, which means you have no risk. We don't charge you unless and until we're certain you'll get a refund or tax credit.
For a succession plan, we will educate and train your selected accountable staff. To give you peace of mind, we offer and strongly recommend continuation plans for the future, which will give you unlimited access and resources to our experts, as well as internal audit test periods to ensure you're getting the most out of your benefits and staying current with the ever-changing tax laws.
We begin every analysis with the goal of delivering a "non-business interruption approach." To get started, we'll need a little bit of information from you that you already have on hand (i.e.payroll year-to-date lists, a few samples of invoices), and we'll take it from there!
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Many businesses are still unaware that R&D credit eligibility extends beyond product development to include activities such as the latest manufacturing methods, software development, and quality improvements. Even start-ups may be able to utilize the R&D credit against their payroll tax for up to 5 years.
So, if your company does any of the following, your business likely qualifies for the research and development credit:
Wage, supply, contractor, and computer costs coupled with credible employee testimony can form the basis of an R&D credit claim.
The IRS permits businesses to deduct all R&D expenses in a single year instead of amortizing as a capital expense. It's up to you which deduction method you use. It's generally a good idea to deduct R&D expenses the first year you start. In this case, if you spend $100,000 on R&D in a particular year, you can deduct it all at once. For small businesses with limited operating funds, this is a break.
A company's net income and operating income go down when R&D is expensed. As an expense, R&D expenditures won't create assets, so they're treated as expenses.
Examples of activities typically considered to fall within the research and development functional area include the following:
Examples of activities that would be included as part of R&D costs include; Materials, equipment, and facilities acquired or constructed for R&D activities.
Generally, all costs incurred during the pre-production prototype phase can be expensed as R&D costs. Once the product or project goes into normal operations, it is no longer considered R&D until future qualifying alterations and improvements are made.
Note: As long as the items have no alternative future use, and therefore no separate economic value, they may be expensed as R&D costs as incurred.
Examples of activities that would be excluded from R&D costs:
According to the forecast for 2022, the United States will be the leading country worldwide in terms of spending on research and development, with R&D expenditure exceeding 679 billion U.S. dollars.
However, China is expected to invest about 551.1 billion U.S. dollars into research and development.
Direct expenses like research and development and selling, general and administrative (SGA) expenses won't be included in the cost of goods sold (COGS).
When calculating efficiency ratios such as gross profit margins, COGS is key.
Comparisons with similar companies should always be made when evaluating a company's relative performance.
Because future economic benefit of R&D is uncertain, ASC 730 says you should expense them when they're incurred. Before January 1, 2022, under IRC section 174, taxpayers can choose whether R&D expenses should be deducted as current expenses, deferred expenses and amortized when a benefit is realized, or capitalized.
R&D costs have to be capitalized and amortized over five years starting after December 31, 2021.
There's still a lot of business owners who don't know that R&D credits extend beyond product development and include things like software development, manufacturing methods, and quality improvements. Almost any company can take advantage of the R&D credit, even start-ups.
Your company can likely claim R&D credit if it does the following:
The R&D tax credits are available as a dollar-for-dollar reduction of business taxes owed.
If a company owes 50,000 in taxes and a current year R&D tax credit is realized of $30,000, the company will now owe $20,000.
The federal tax credit can be realized up to 3 years prior. This would require amending prior returns and will result in refund checks for prior years if found successful.
36 of the states allow for additional state credits, so the rules and limits vary per state.
Current year R&D tax credits can only be taken as a credit to offset taxes owed. If the full amount is not needed or used it can be carried back 1 year and forward up to 20.
The IRS expects 70% - 80% of small and medium businesses (SBE) to qualify.
If your business experienced disruptions to commerce, travel, or group meetings, you qualify!
This includes; supply chain disruptions, price increases, staffing shortages, difficulty hiring, reduced hours, reduction in goods or services offered, inability to travel, or attend conventions.
Determining the proper amount that you’re entitled to is a complex accounting process. Although these are payroll tax credits and refunds, what you’ve paid in payroll tax has no bearing on your ERC calculations.
The refunds are based on many factors including qualifying quarters, number of employees, hours worked, wages paid and if applicable, PPP loans, group health premiums and participation in other government programs to name a few.
Calculate ERC for 2020:
For 2020, the ERTC credit is computed at a rate of approximately 50% of your employee’s qualified wages paid. This means that if you are an eligible business, you are able to claim up to $10,000 in eligible wages per employee in healthcare and wages for the entire year.
For 2020, there is a maximum credit of 50% of eligible wages or $5,000 per employee annually. If your business had less than one hundred full-time employees in 2019, the ERTC funding is available for all employees receiving wages in the fiscal year 2020.
Calculate ERC for 2021:
The credit available to claim for the 2021 ERTC fund program is different from in 2020. The credit is calculated at a rate of 70% of the employees’ qualified wages paid. This is still similar to 2020 in the aspect that you can claim up to $10,000 in eligible wages per eligible employee.
For 2021, there is a maximum credit of $7,000 per employee per quarter. The main difference between 2020 and 2021 is that you have the ability to claim up to $21,000 per employee for the first three quarters of the fiscal year. If you had less than five hundred full-time employees in 2019, you could use the credit for all eligible employees who received wages in 2021.
The Employee Retention tax credit can still be filed in 2022 for 2021 and 2020!
If your business recovered from a substantial decline in gross receipts and you did not claim the Employee Retention Tax Credit, you can claim it in 2022.
Businesses have until 2024 to calculate eligibility for wages paid after March 12, 2020.
You can qualify for the ERTC credit in two ways:
Employers who get PPP loans can apply for ERC under the Consolidated Appropriations Act. The wages you use for each program have to be different.
Employers who report payroll costs on a PPP application for forgiveness in 2020 aren't eligible for ERC. If you're getting PPP, you can get the Employee Retention Credit if:
See here for a more in depth look into the differences between PPPs and ERCs.
The ERC program was extended through December 2021. In November, however, Biden took back the 4th quarter allowance for general businesses. At this time no payroll is eligible after September 30, 2021 unless the business is considered a recovery startup.
To be considered a recovery start up a business must have commenced operations after February 15, 2020 and meet certain revenue thresholds.
If a business meets the 2 simple qualifications they automatically qualify for Q3 & Q4 2021. There are additional bills in congress pending to extend the program.
The IRS is generally taking up anywhere from 4-6 months to send refund checks to businesses. When 60 days lapses the IRS should send the businesses a letter requesting additional time.
The IRS pays interest on the additional time spent. We suggest that once you get to the 4 month point you call the IRS to provide a status update.
See here for the latest development on this.
The Employee Retention Credit (ERC) is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021 and 70% of the qualified wages paid during 2021.
The ERTC is a payroll tax credit or refund (not an income tax credit) that gives back to employers who retained their employees on payroll during the initial shutdowns of the covid-19 pandemic. It is ultimately to be reported on Form 941.
As of November 17, 2021, the IRS had approximately 2.4 million unprocessed Forms 941 (ERC) and 400,000 unprocessed Forms 941-X (ERC refund requests). Additionally, the IRS advised that they will be processing all Forms 941 before they process any of the corresponding Forms 941-X.
Keep in mind, too, that the IRS still has an unknown number of 2020 payroll refunds to process before getting to the 2021 requests.
ERC claimant businesses should plan for a turnaround time of four to six months.
To check the status of your refund, you can call the IRS at (877) 777-4778. However, because of a shortage of agents available to field phone calls, your “on hold” time may be exceptionally long. It may be more productive to visit the IRS website for additional covid-19 newsroom updates.
In New York, sales tax is applied differently based on what phase of the manufacturing process you use items in.
There are three phases: administration, production, and distribution.
Your business usually pays sales tax when you buy items you use for administration (e.g., marketing, accounting, sales, testing raw materials, etc.) or distribution (e.g., storing, displaying, shipping, etc.).
Fortunately, New York generally exempts sales tax on products you buy for production.
In South Carolina, manufacturers, processors, and compounders get a bunch of sales and use tax exemptions.
These exemptions include the following:
Yes! Machinery and equipment used directly and predominantly in the production of tangible personal property for sale can be purchased exempt from sales tax (Form ST-121).
Machinery and equipment used in the administration or distribution phases does not qualify for the exemption, though.
Yes! "Machine exemptions" exempt purchases of machines used to manufacture, process, package, compound, mine, or quarry tangible personal property from sales tax in South Carolina.
That would be an excise tax!
Excise taxes are taxes required on specific goods or services like fuel, tobacco, and alcohol. Excise taxes are primarily taxes that must be paid by businesses, usually increasing prices for consumers indirectly. Excise taxes can be ad valorem (paid by percentage) or specific (cost charged by unit).
For example, New York State imposes an excise tax on the sale or use in New York State of beer, wine, and liquor. New York City imposes an additional excise tax on the sale or use in New York City of: beer; and. liquor containing more than 24% alcohol by volume.
Another example is South Carolina, where cigarettes are subject to a state excise tax of $0.57 per pack of 20. Cigarettes are also subject to South Carolina sales tax of approximately $0.29 per pack, which adds up to a total tax per pack of $0.86. Additionally, other tobacco products are subject to a state excise tax of 5% of the manufacturer's price as well as federal excise taxes.
The price of all tobacco products sold in South Carolina also includes Federal Tobacco excise taxes, which are collected from the manufacturer by the Tobacco and Tobacco Tax and Trade Bureau and generally passed on to the consumer in the product's price.
You may be eligible for a refund of sales or use tax if you are a business registered for sales tax and you overpaid sales or use tax, paid sales or use tax in error, or collected, reported, and remitted sales tax but then repaid it to your customers.
If you are a business registered for sales tax, you may claim a credit against your sales tax due on your sales tax return. A credit will reduce the amount you owe.
Form AU-11, Application for Credit or Refund of Sales or Use Tax, is the most commonly used refund form, MTRSNow is available to help you begin this process of Sales and Use Tax refund claim in New York state.
Businesses can claim back sales tax back in South Carolina for Sales and Use tax.
For Sales Tax transactions, the seller must request a refund. However, the purchaser may request a refund if the seller provides an assignment of refund rights.
For Use Tax transactions, the purchaser must request a refund. However, the seller may request a refund if the purchaser provides an assignment of refund rights. No assignment is necessary when the seller establishes that they have paid the tax and refunded it to the purchaser.
Business filing the claim should provide the amounts of tax paid, by period, on their original return corresponding to this request, MTRSNow is available to help you begin this process of Sales and Use Tax refund claim in South Carolina.
In New York state, a business can generally claim a credit or refund that was filed within three years from the date a return is filed or two years from the date the tax was paid, whichever is later.
The general rule for a sales tax refund claim in South Carolina, is that the claim must be filed within three years of the time the timely filed return, including extensions, was filed, or two years from the date of payment, whichever is later.
If no return was filed, a claim for refund must be filed within two years from the date of payment.