Software Enabling Companies to Interact with Third-Parties… An R&D Tax Credit Hidden Gem

People don’t typically think of research and development when they think of banks, retailers, brokers, insurance companies, hedge funds, and financial service companies. However, many of these companies have large IT departments that are developing software for their own operations. That development can qualify for a very significant tax incentive – the Research and Development (R&D) Tax Credit.

SOFTWARE ENABLING COMPANIES TO INTERACT WITH THIRD-PARTIES… AN R&D TAX CREDIT HIDDEN GEM

The development of software by or for a company that is deemed to be for “internal use” will qualify for the R&D tax credit only if the software is considered innovative. Examples of internal use software include software that is developed for a company’s financial management, human resources, or support services. It can be difficult for most software developed for these purposes to meet the high threshold of innovation test in order to qualify for the credit. It would need to be software that is not otherwise commercially available, for example.

However, there are two typical situations when the software developed for a company would not need to be considered innovative in order to qualify for the R&D tax credit. First, when the software is developed to facilitate the viability of business interactions with third parties, such as executing banking transactions or tracking deliveries. And, second, when the software is developed to function as a software portal that enables third parties to execute actions on its software system (think of a functional website or an app on your phone). Since these types of software do not need to meet the innovation test (although, some likely would in any event), their development would very likely qualify for the R&D tax credit.

Examples of Such Software

  • Mobile Banks

Mobile technology has opened banking institutions to this new trend. Branchless banks and mobile banking services are gaining space. They all charge minimal fees and offer simplified solutions for payments. The mobile bank is designed for on-the-go-users, and is designed to provide many of the features of traditional banking via smartphones at a low cost.

  • Mobile Payments (P2P)

Apps like PayPal and Venmo, for example, allow users to exchange payments with people in their social circles via a smartphone. With just the link of a bankcard transactions can happen overnight.

  • Business Apps for Finance and Accounting

These apps help to streamline financial tasks, including payroll and taxes, for businesses. They can also give business owners a better picture of their company’s financial health.

  • Mobile Imaging Technology

Depositing checks is an appealing function of mobile banking. Instead of going all the way to a bank branch or an ATM, customers can easily deposit their checks by simply snapping a photo of it. This feature has also expanded to mobile photo bill pay, which can be used with banks, financial institutions, and insurance agencies. Through just the snap of a picture, customers can add billing information to their accounts.

  • Fully Functional and Engaging Websites

Music Websites

Many music sites offer a great service that challenges the user’s understanding through a creative blend of videos and animation. These websites have tools that are very engaging for the user.

Retail Websites

Many retail websites have adopted the trend of using compelling visuals of their products. Users interact with simple, color-based backgrounds that are accompanied by strong typography help to keep the focus on exactly what the user came there to see.

Design Websites

Designers take advantage of a fully engaging website experience for their viewers by showcasing their portfolios with strong photography and animations.

For a consultation or to learn more about how the R&D tax credit may be applicable to your business, please reach out to David Mayer, CPA and National Director of Engineered Tax Services, directly at dmayer@engineeredtaxservices.com. You can also learn more about how internal use software qualifies for the R&D tax credit in David’s latest video: https://bit.ly/Tax-Credit-Opportunity or on EngineeredTaxServices.com.

5 Tips to Maximize Your Tax Refund

5 Tips to Maximize Your Tax Refund

It’s tax season again, and that means you are probably thinking of how to maximize your tax refund to get the best return possible. The tax experts at Engineered Tax Services (ETS) can always help you with your specialty tax options, but there are also some other tips and tricks to consider prior to doing your taxes.

5 TIPS TO MAXIMIZE YOUR TAX REFUND

Consider Your Filing Status

It is important to consider your filing status when trying to maximize your tax return. For example, if you are married, you may be used to filing jointly. However, this is not always in the best interest when it comes to your tax refund.

ETS tax experts recommend considering how much your tax savings would be under both circumstances. This is because the Internal Revenue Service (IRS) uses a percentage of adjusted gross income (AGI) to calculate whether deductions (i.e. medical or other miscellaneous deductions) can be used. If your spouse has a lot of medical expenses, for example, filing separately can allow he or she to reach the necessary AGI percentage based on his or her income.

Choosing to file separate returns is not always the way to go, however. So, in order to maximize your tax refund, you must weigh both sides to see the potentials.

Remember Your Tax Deductions

Throughout the year, you may have done some philanthropic work or taken a job that is over 50 miles away from your home. The cost of tolls and miles represent tax deductions that you can take advantage of. Do not forget to keep all your receipts in these cases. Having good travel records can help you to reach the necessary minimum AGI percentage for miscellaneous deductions. Also, don’t forget to keep track of your charitable deductions. These can help you maximize your tax refund as well.

Maximize IRA Contributions

You can claim the credit on your return, and you have until April 15th to open a traditional IRA for the previous tax year. You can take advantage of the maximum contribution. Also, if you contributed to a Roth IRA, you may be able to claim the retirement savings contribution credit. That’s the credit that lowers taxable income and results in maximizing your tax refund.

Watch the Clock

It is important to keep track of time in order to maximize your tax refund. For example, if you pay your January mortgage payment before December 31st, you can get the added interest for your mortgage interest deduction. Also, if you schedule your doctors’ appointments and exams in the last quarter of the year, you can increase your medical expense deduction.

Be “In the Know”

Tax laws change frequently, as we have seen with the recent tax reform. Rules, regulations, and credits come and go. So, staying “in the know” can be to your benefit. By keeping up with tax changes, you can plan for the future and maximize your tax refund this year.

For more information about how you can maximize your tax refund, please contact Engineered Tax Services at (800) 236-6519. You can also find out more about us on our homepage at EngineeredTaxServices.com. Don’t forget that ETS is the largest specialty tax firm in the United States with the best team to help you maximize your tax savings. We’re happy to help you by performing cost segregation studies, R&D tax credit studies, filling you in about energy incentives, and state and local tax incentives. There are so many specialty tax incentives that can affect your tax savings. These will, in turn, help you to maximize your tax refund.

Home Office Deduction Qualifiers and Benefits

The tax professionals at Engineered Tax Services (ETS) always consider the home office deduction when clients look to them for proactive tax plans. After all, if the IRS allows you to take a deduction for bills you already pay each month like utilities and a mortgage, why not claim the tax deduction and save some money? The home office deduction is not as huge of a deduction as cost segregation, conservation easement, energy credits, etc., but most business owners can arrange their operations to claim it.

HOME OFFICE DEDUCTION QUALIFIERS AND BENEFITS

Even the smallest of tax savings each year can really add up. Additionally, a few years ago, the IRS came up with a simplified method that eliminates most of the recordkeeping requirements and the depreciation recapture provision.

Who Can Claim a Home Office Deduction?

If your ur office space takes up 20 percent of your home, that means you can deduct 20 percent of bills for allowable business operations. Small business owners who report their income and expenses on Schedule C are the people who most often claim the home office deduction. Form 8829, Expenses for Business Use of Your Home, is filed in association with Schedule C. However, the home office deduction may also be claimed by farmers filing Schedule F. Partners receiving a Schedule K-1 (1065) can also claim it. Employees who are not provided a place to work by their employers can claim the home office deduction as well.

Home Office Deduction Qualifiers

  • Utilities (electricity, water, sewer, natural gas, propane, heating oil, trash service, security system monitoring)
  • Homeowners’ or renters’ insurance
  • Repairs and maintenance qualify. This includes items such as repairs to the home or appliances, snow removal, tree removal, carpet cleaning, HVAC maintenance, etc. However, the IRS specifically excludes lawn care as pertaining to the “whole house”.
  • Homeowners’ association dues and condo fees
  • Mortgage interest qualifies.
  • The amount you claim as a home office deduction applies to real estate taxes.
    People who rent instead of owning a home can use rent as a qualifier. Instead of claiming mortgage interest and real estate taxes, they claim their rent.

For more information, please call (800) 236-6519, or visit our homepage at EngineeredTaxServices.lamp2.i4.net

Top 5 Tips for Tax Season

Top 5 Tips for Tax Season

With the new tax plan in motion, this tax season may be or has been a bit trickier. Try not to let taxes stress you out, though. Here are the top 5 tips for tax season that will help you get through it with confidence.

TOP 5 TIPS FOR TAX SEASON

1.) Educate Yourself on the New Tax Law

Most of the changes that were set in motion with the new tax law will apply to 2018’s tax year. However, it is always a good idea to educate yourself – especially on the new tax law. Because of the new additions, you may have seen changes to your paycheck already. Be sure to check your current W-4 form to be sure you are.

2.) Don’t Wait to File

Waiting to file your taxes will only add stress to your life. However, life is very busy and we get tied up in daily events. But if you can, you should gather all of your relevant documents and information early. This will only benefit you in the long run. Don’t forget your property or real estate documents, proof of charitable donations, and any business, medical, or education receipts. You should also keep track of your interest and investment payments.

3.) Know Your Filing Status

Knowing your filing status is an obvious necessity. Whether you are single or head of household, your taxes will be different. Also, if you are married, don’t opt for joint filing right away. You should run the numbers to see which status makes sense for your situation.

4.) Be Charitable

Charitable giving is rewarded by the IRS. These are tax-deductible, so why not take advantage? If you do this or have done this, be sure to save your receipts and submit them. Also, if you have donated property instead of cash, “Publication 561” will help you determine the property value.

5.) Don’t Forget Any Deductions

Deductions can help reduce your taxable income – even if it’s just by a little. Applicable deductions include:

  • Work-related
  • Travel
  • Debt interest
  • Charitable donations
  • Moving charges
  • Costs related to job hunting
  • Home office expenses for the self-employed

Engineered Tax Services will handle your last-minute cost Segregation, 179D energy, 45L energy and R&D tax credit studies. Just call (800) 236-6519 or visit EngineeredTaxServices.com for more information.

5 Deductions and Credits to Reduce Your Taxes Under TCJA

Did you know that you could have more money in your pocket right now? That’s right. Because when it comes to taxes, tax credits and deductions have a huge impact under the Tax Cuts and Jobs Act (TCJA). They can reduce or offset the taxes that you owe.

5 DEDUCTIONS AND CREDITS TO REDUCE YOUR TAXES UNDER TCJA

According to the most recent IRS and a Wolters Kluwer report, here is the impact that the TCJA will have for 2018.

  • Standard Deductions: This is the largest deduction in terms of total dollars claimed by taxpayers. For 2018, the standard deduction is doubling under the TCJA passed at the end of last year. In fact, an expected three-fourths of all taxpayers will be claiming it.
  • Charitable Contributions Deductions: Fewer taxpayers may claim the charitable contributions deduction under that TCJA. That’s because of the increase in the standard deduction. However, taxpayers that do, may claim more with the increase in the deduction limit from 50 percent to 60 percent of AGI.
  • State and Local Taxes Deductions: The size of state and local tax deductions are expected to be greatly reduced due to the new $10K limit on the deduction under the TCJA. Also, fewer taxpayers are itemizing deductions due to the greater standard deduction.
  • Home Mortgage Interest Deductions: The home mortgage interest deduction may go down due to the increased standard deduction. Also, the new $750,000 limit on home mortgage principal will have effects.
  • Earned Income Tax Credits: There were no major changes made to the Earned Income Tax Credit under the TCJA.

For more information, please call (800) 236-6519. You can also find out more at EngineeredTaxServices.com.

Tax Reform Phase Two: What’s to Come?

One of the top tax writers in the House of Representatives has now confirmed that the Trump administration is working alongside them to create tax reform phase two. House Ways and Means Committee Chairman, Kevin Brady, R. Tex, spoke about his thoughts for tax reform phase two with expert and CEO of Engineered Tax Services, Julio Gonzalez, in a meeting just a week ago in West Palm Beach, Florida.

According to a Ways and Means spokesperson and Wolters Kluwer, there are opportunities to make individual tax cuts permanent, increase innovation, and encourage household savings. That’s because House tax writers are considering adding more tax changes to tax reform phase two. This comes just after President Trump announced that phase two of tax reform is on its way.

POTENTIAL CHANGES FOR TAX REFORM PHASE TWO

Individual Tax Cut Changes

Temporary individual tax cuts created under the Tax Cuts and Jobs Act (TCJA) may be made permanent with phase two of tax reform. That’s according to a report from Wolters Kluwer. The individual benefits and tax rates were not made permanent under the new law for budgetary reasons. According to Chairman Brady, the tax cuts for families were long-term, but are not yet permanent. “We’re going to address issues like that,” Chairman Brady said.

Phase Two Looking Forward

According to House spokespeople, the House is always looking to improve the tax code. That’s because improving this with valuable information will improve our nation. “As a CEO in the tax industry, I see amazing momentum when it comes to the economy and taxes,” said Mr. Gonzalez. Brady has stated that lawmakers have some new, innovative ideas. These ideas will combine additional tax reform measures with technical corrections to the existing TCJA. This means that any significant changes will be new ideas.

Please contact Engineered Tax Services at (800) 236-6519.