End of Year Tax Tips

Written by Mac Smith, Ron Kelm, and Linda Berggren Wednesday, December 22 2010

Tax strategies are top of mind at this time of year. As the holidays and 2011 approach, several professionals at Atlanta-based accounting firm Gifford Hillegass & Ingwersen LLC (GH&I) offer up some favorite tax strategies and opportunities. Checking this list twice could bring a gift, unexpected.

By Mac Smith
The Research and Development Credit
Many companies don’t bother calculating the available research and development credit, as they don’t currently have taxable income so they can’t use the credit today. Even if your company doesn’t have taxable income today, I presume that it someday will. Wouldn’t it be nice to be able to offset some of that 35-percent tax liability with credits that have been generated over the previous years?

Maximizing this credit requires the compilation of information about your business operations and capturing all of the expenses related to research and development. This is best accomplished concurrently to making the expenditures, as you can only go back three years to capture R&D expenses previously unclaimed. You can, however, carry forward any unused credit for up to 20 years.

The Georgia Films Credit
This credit isn’t just for movie makers. This credit came about in 2008 as the result of the Georgia Entertainment Industry Investment Act and grants an income tax credit of up to 30 percent for qualified productions including: feature films, television series, commercials, music videos, video game developers, and animation producers. This is one of the most generous tax incentives in the country. And it gets even better.

This credit is transferable. This means that if you don’t need it, you can sell it and effectively get a rebate on those qualifying expenses, courtesy of the great state of Georgia.

Georgia Angel Investors Credit
In an effort to incite investment in Georgia’s emerging businesses, the state is offering a 35-percent income tax credit to individuals and pass-through entities for investments made in qualifying small businesses in 2011, 2012, and 2013. This provides a quick 35- percent return on investment in a qualifying Georgia business and should be one of the key factors to highlight when you are trying to raise your first round of capital.

Mac Smith is senior manager of the GH&I technology group.

By Ron Kelm
Green Incentive for Business
Section 179D deduction incentives continue to be available for lighting, HVAC, and building envelope construction through 2013. Lighting is a common option for improving efficiency in existing structures, at a reduced upfront cost. You can deduct up to 60 cents per square foot of the cost for lighting only, or $1.80 per square foot for lighting, HVAC, and building envelope construction. Georgia has tax credits, too, but the standards are more stringent than the federal deduction and preapproval is required.

Accounting Method Selection
A great way to save taxes, particularly for new companies, is to use the best accounting method available that will defer income recognition. For those that qualify for the completed contract method, proper early planning on which contracts to extend completion to next year, if you can control it, will reap tremendous cash flow benefits.

Ron Kelm is senior manager of GH&I construction/real estate.

By Linda Berggren
Tax Credit Available to Business and Small Nonprofit Organizations
A gift to employers of fewer than 25 full-time equivalent employees was provided in the Patient Protection and Affordable Care Act, which created the credit to help small employers offset the costs of health insurance. For-profit small employers will use Form 8941 to calculate the credit and include the amount of the credit as part of the general business credit on their federal income tax returns. Nonprofit small employers will claim the credit on Form 990-T. (If the organization does not have unrelated business income tax, the amount of the credit will be refunded.)

Temporary Relief from the Reporting of Health Insurance Premiums Paid for Each Employee in 2011 Forms W-2 filed in 2012
The Internal Revenue Service, on Oct. 12, released Notice 2010-69 providing interim relief to employers with respect to reporting the cost of coverage under an employer-sponsored group health plan on Form W-2, Wage and Tax Statement. The Patient Protection and Affordable Care Act (Affordable Care Act) (P.L. 111-148) requires employers to report the aggregate cost of applicable employer-sponsored coverage on the Form W-2. The notice makes this provision optional for employers in 2011, allowing employers time to make any necessary changes to payroll systems or procedures to comply with this new reporting requirement.

The GH&I “Insights for Nonprofits” quarterly e-newsletter provides a wealth of useful information helpful to nonprofit organizations, and it remains one of my favorite things to offer nonprofit organizations as they seek credible information and tools in which to operate. To subscribe, visit www.ghi-cpa.com.

Linda Berggren is principal for nonprofit business at GH&I.