Why Offer a 401(k)?
You’re probably well aware that our current job market is unique, with many open positions and not enough workers to fill them all. Job-seekers have more options than ever, so they’re able to be a little pickier when consider offers and benefits.
If your company doesn’t offer a competitive benefits package, potential new hires may move on to companies that do. A 401(k) plan is a must-have, regardless of the average age of your workforce. It’s never too early to start saving for retirement, and workers who start saving in their 20s can build their accounts faster and more efficiently than those who wait until later in life.
We can help you offer a competitive 401(k) plan to your employees, regardless of your company size. We partner with VOYA, a trusted name in retirement planning, to deliver high-quality service. Contact your customer service rep to learn more about the benefits of offering a 401(k) or the plans we provide.
New Legislation Expands the Small Business Research Credit
The Inflation Reduction Act which was signed into law by President Biden on August 16, 2022 establishes an expansion of the current Small Business Research Credit that has been in place since the PATH Act in 2017. The expanded credit may provide significant benefits to small businesses that conduct qualifying research activities during the course of their business.
The PATH Act extended the longstanding research and development credit to qualifying small businesses beginning in Tax Year 2016.
For purposes of the credit, a qualified small business is a corporation (including an S corporation) or partnership with:
- Gross receipts of less than $5 million for the tax year, and
- No gross receipts for any tax year before the 5-tax-year period ending with the tax year.
Any other person (sole proprietor) may be considered a qualified small business if the person meets the requirements of (1) and (2) above, taking into account the aggregate gross receipts received in all the trades or businesses.
The research credit is calculated on the company’s income tax return on Form 6765, and then up to $250,000 off the credit can be carried to the Form 941 on Form 8974, and the credit can be used to offset the employers share of Social Security tax each quarter. Any amount of the credit in excess of the employer share of Social Security tax can then be carried forward to each succeeding quarter of the Form 941 until the credit is used in full.
For more details on computing and claiming the credit refer to IRS instructions for Form 6765, and the Instructions for Form 8974. Keep in mind the published instructions reflect the credit as it is currently in place. It is expected that IRS will update their documents and procedures sometime during 2023 to facilitate the computation of the expanded credit amount.
What the Inflation Reduction Act Changes:
- Adds an additional credit amount of $250,000 for tax years after 12/31/2022 for a total credit limit of $500,000
- Adds Employer Medicare tax to Social Security tax creating a larger pool of payroll dollars that an employer can offset with the credit.
Employers that may qualify are encouraged to discuss the opportunity with their tax advisors to determine their eligibility for the small business research credit.
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