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3 Complex Tax Issues Facing Small Businesses

Here are three changes that the IRS has implemented, all of which could have strong impacts on small businesses.

KBKG, a provider of tax services for CPAs and businesses, has identified three changes that the IRS has implemented; each one could have strong impacts on businesses. 

Employee Retention Credit (ERC)
The IRS recently suspended accepting new ERC claims through at least December 31, 2023, because of the increasing number of fraudulent claims and malpractice of the ERC program. Those that have already submitted an ERC claim can anticipate a longer processing time, as the IRS continues to file through the fraudulent claims.

If it is believed that an already filed claim is erroneous, those that have submitted can withdraw the claim, even if it is already under audit. Those still looking to file an ERC claim can continue to do so under the strict guidance of the IRS and through a certified tax professional, like KBKG.

174 Research and Expenses
To pay for the tax cuts in the Tax Cuts and Jobs Act, beginning in 2022, Section 174 Expenses need to be amortized over 5 years (15 years for international), increasing many businesses’ taxable income. This change was always meant to be something that was corrected via legislation, leading many in early 2023 to believe that there would be a repeal.

This impacts the Sec. 41 R&D Tax Credit in the following ways: The R&D Credit utilizes Section 174 expenses as the basis for the credit. With uncertainty around, and unwillingness to increase taxable income, many who qualify for the R&D Credit were hesitant to claim for the 2022 tax year or waited, in the hope of a repeal. Many still believe there will be a repeal of the amortization. However, it likely won’t be retroactive for 2022 and will apply for 2023 at earliest.

Green Building Tax Incentives (179D Deduction and 45L Tax Credit)
To maximize a claim for Green Building Tax Incentives, candidates must pay employees with prevailing wages, which can result in increased labor and project costs. Trying to qualify a project for Green Building Tax Incentives can result in increased costs, as energy-efficient materials typically cost more money. Tax-exempt entities can also benefit from the 179D Tax Deduction through a design rebate received from the project’s designer. 

Tax service providers such as KBKG help clients navigate complex matters including the Employee Retention Credit, 174 Research and Expenses, and Green Building Tax Incentives like the 179D Deduction and 45L Credit. Due to the intricacy of these tax programs, KBKG only employs trusted IRS experts, CPAs, and accounting professionals who adhere to a strict code of ethics and provide solutions for clients with integrity at the forefront.