Tax Planning, Preparation & Controversy
Federal and International
Our firm provides a wide variety of tax preparation and compliance services for US clients a number of whom have foreign-based operation, including:
- Preparation of IRS forms 1120,1065,1120S
- Preparation of non-resident tax returns- form 1040-NR
- Preparation of consolidated federal tax returns
- Preparation of fiduciary tax returns including bankruptcy cases- form 1041
- Preparation of not-for-profit tax returns public and private charities- forms 990, 990-PF
- Information gathering, calculation, and preparation of tax returns which relate to foreign operations- forms 5471,8865, 1120-F,8865,8858
- Calculation of foreign tax credits, Subpart F Income inclusion, Earnings and Profits, Section 956
- Calculation, tax remitting, and filing of FIRPTA withholding forms relating to payments to foreign persons- forms 8804,8805,1042-S
- Preparation of IRS Application for reduced/eliminated FIRPTA withholding
- Income tax filings of US beneficial owners of foreign trusts- forms 926, 3520
- Information gathering and preparation of US information returns for foreign bank accounts (FBAR)
- Preparation of state unitary, water's-edge, and consolidated tax returns
- Preparation of local income and personal property tax returns
- Information gathering and calculation of state allocation factors
- Information gathering and preparation of States' Nexus questionnaires
- Assistance with Voluntary Disclosure Agreements
Sales and Use Taxation
- Information gathering and completion of application for registration
- Preparation and e-filing of sales and use tax returns
- Review Nexus exposure
- Preparation of Voluntary disclosures and Amnesty filings
IRS and States' Tax Controversy
- IRS and States' tax audit representation
- Representation in Offer-In-Compromise
- Representation in the audit appeal phase
- Negotiating of penalty abatements and interest reduction
- Assistance and representation of whistleblower cases
Tax Credits and Incentives
Research & Development Innovation
Tax credits reduce your tax liability by taking advantage of Federal and State R&D Credits.
A research and development tax credit is available from the federal government and many state governments to encourage businesses to invest in innovation in the field of scientific research, manufacturing and other industries. The tax credit, which is not a refund but a reduction in a company's taxes, helps offset the costs associated with research and development activities. The R&D tax credits are dollar-for-dollar reductions in tax liability, and they often result in significant cash refunds.
Let our experienced tax consultants identify and capture your maximum Federal and State Research & Development Tax Credits. First we determine whether the expenditures fall under the R&D Credit definitions. If the initial assessment shows potential savings, then we conduct a complete assessment. This process normally involves site visits and interviews with financial personnel, product developers, engineers, and IT staff. We have a 100% success rate, never having had a claim denied. This is because we not only calculate R&D credits, and conduct a thorough on-site R&D visit for every study. We also provide a bullet-proof, audit-defensible R&D Credit Study Report that captures the information connected to the various qualifying projects.
You've already invested in product and process improvements. Now let us help you pay for them! If your company has spent time and energy to improve your product then you likely have qualifying research under the Federal and/or a State Research and Experimentation Tax Credit.
State Research and Development Tax Credit. In addition to the Federal R&D Credits that you may qualify for, many states also offer R&D credits which may offset state corporate income taxes. The states see these credits as an incentive to get businesses to locate in their borders. This provides jobs, which increases the tax revenue for the state, and creates economic development opportunities. The use of research and development credits by states results in a win-win situation for both the business and the state. If you are planning to relocate your business and/or your company's research and development activities to a particular state, then let us analyze which state will enable you to obtain the most credits for your industry.
The Federal Research and Development Tax Credit has been part of the Internal Revenue Code since 1981; however, a large number of companies have not taken advantage of this provision. In the past, the rules were very confusing. It was hard to determine who qualified, let alone which products or processes might qualify. While the rules are still complex, a company may be able to claim the credit providing that they are conducting research in the US, if they meet the four following criteria:
Four Part R&D Tax Credit Test:
- Permitted Purpose: The activity must result in a new or improved process, function, product, performance, reliability, quality, or significant reduction in cost. Probably the most common type of activity overlooked by companies regarding these specific criteria involves significant improvements made to production-line operations. A very common example of this sort of improvement would be the updating of production-line capabilities by a manufacturer that ultimately improved efficiency, increased production capacity, and eventually yielded an overall reduction in costs. An example of this type of activity would be a company that manufactures heavy equipment, and relied upon a labor-intensive approach to production. If that company were to implement improvements in its manufacturing process, by way of automation or some other means that required investment in new equipment for the plant floor, then it's very possible that the costs associated with the implementation of the new production process could be eligible for the R&D tax credit.
- Elimination of Uncertainty: Were the activities conducted and intended to eliminate uncertainty concerning the development or improvement of a product? This criterion specifically involves the identification of information that is uncertain at the onset of the project or activity. Such uncertainty can relate to the capability of the product, the method used to produce it, or the appropriate design of the product. The examples that we typically encounter when consulting with clients in this arena deal with issues such as: Will the new or improved manufacturing process integrate with our current system, on any level? Will our new product development meet the customer specifications? Will the potential benefits outweigh the potential risks? Or will the new or improved product or activity even work?
- Technical in Nature: Does the research fundamentally rely on the principals of, engineering, physical or biological science, or computer science? This criterion is usually a fairly easy one to deal with. What it really does is eliminate the soft sciences from the formal definition of technology. In other words, products or activities that are predicated upon literary, historical or social sciences do not qualify for the R&D Tax Credit. In all of our experiences, this technology criterion has never been an issue when performing an R&D study for a manufacturing company or a pharmaceutical company.
- Process of Experimentation: Does the activity involve developing one or more hypotheses for specific design decisions, testing and analyzing those hypotheses, and refining and discarding the hypotheses? A key factor regarding the Process of Experimentation hurdle was recently crystallized, when Treasury Regulations changed the wording to evaluation of one or more alternatives. Previous language defined the process as evaluation of more than one alternative.
Costs that Qualify for the Federal RD Credit. Generally, the credit will be 20% (13% net) of qualifying expenditures that exceed a base amount. So, as you can ascertain, the potential for R&D Credits to be large amounts is very reasonable. In fact, it is not uncommon for R&D Credits to be in excess of $100,000 per year. The base-amount calculation is probably one of the more challenging calculations of the entire project. You must be aware that if the company was conducting qualified research, and had qualified expenses and gross receipts from the period 1984 through 1988, then the more complicated calculation in developing a base period amount will result in significantly more R&D Credits than the short-cut technique, Alternative Simplified Research Credit Method. Conversely, if the company did not conduct qualified research until after 1989, then they are deemed to be a startup company, and must calculate their base period amount using the "Start-Up Method." But don't worry, we have the expertise to guide you as to which method is appropriate for your organization.
Employee wages and costs also qualify for the R&D Credit including W-2 wages for employees engaged in research activities. This number includes the wages of personnel directly involved in, supervising or supporting research and development efforts. If an individual spends 80% or more of their time working in the R&D area, then 100% of their wages are counted when calculating the R&D credit. If the percentage of time spent is less than 80%, then the actual percentage of time the individual spends in the R&D area is multiplied by his or her salary and allocated; and 65% of costs of contracted research, or 75% of contract research performed by a qualified research group such as a University or consortium.
Enterprise Zone Credit
A corporate income tax credit or a sales tax credit may be taken by any business located in an enterprise zone that has increased jobs from the number of jobs 12 months prior to the application date. The credit applies only to wages that are subject to the unemployment tax and does not apply to any new employee who is employed for fewer than three full months or to any employee who is an owner, partner or majority stockholder of an eligible business.
The credit is equal to:
If the new employee is a participant in the welfare transition program, the credit is:
- 20% of the monthly wages paid to each new employee hired when a new job has been created;
- 30% of monthly wages if the business is located in a rural enterprise zone;
- 30% of the monthly wages if more than 20% of the business's employees are residents of an enterprise zone;
- 45% of the monthly wages if the business is in a rural enterprise zone and more than 20% of employees are residents of a Florida enterprise zone.
These credits may be carried forward for up to five years. A business that claims the corporate income tax credit may not claim the similar sales and use tax credit for any new employee.
- 40% for $4 above the hourly federal minimum wage rate;
- 41% for $5 above the hourly federal minimum wage rate;
- 42% for $6 above the hourly federal minimum wage rate;
- 43% for $7 above the hourly federal minimum wage rate;
- 44% for $8 above the hourly federal minimum wage rate.
A business must first obtain certification from the enterprise zone coordinator for the zone in which the business is located. To claim the corporate income tax credit, Form F-1156Z, Florida Enterprise Zone Jobs Credit Certificate of Eligibility for Corporate Income Tax, must be attached to Form F-1120, Florida Corporate Income/Franchise and Emergency Excise Tax Return. To claim the sales and use tax credit, Form DR -15ZC, Application for Florida Enterprise Zone Jobs Credit for Sales Tax, must be filed. Generally, the sales tax credit form must be submitted within six months of the date a new employee is hired.
Renewable Energy Technologies
Corporate income tax credits are allowed for investments in renewable energy technologies. Eligible costs are all capital costs, operation, and maintenance costs in connection with:
For tax years beginning after 2008, any corporation or subsequent transferee that is allowed a renewable energy technologies tax credit may transfer the credit, in whole or in part, to any taxpayer by written agreement without transferring any ownership interest in the property generating the credit or any interest in the entity owning such property. The transferee is entitled to apply the credits against the corporate income tax in the same manner as if the transferee had incurred the eligible costs. A tax credit held by a corporation that is not transferred may be passed through to partners, members, or owners in the manner agreed to regardless of whether such partners, members, or owners are allocated or allowed any portion of the federal energy tax credit for the eligible costs.
- An investment in hydrogen-powered vehicles and hydrogen vehicle fueling stations;
- An investment in commercial stationary hydrogen fuel cells; and
- An investment in the production, storage, and distribution of biodiesel and ethanol in the state, including the costs of constructing, installing and equipping such technologies. Gasoline fueling station pump retrofits for ethanol distribution qualify as an eligible cost.
- Credits are equal to 75% of eligible costs. Eligible costs are limited to:
- Research and development costs up to $3 million per state fiscal year for all taxpayers, in connection with an investment in hydrogen-powered vehicles and hydrogen vehicle fueling stations in the state;
- Capital costs, operation and maintenance costs, and research and development up to $1.5 million per state fiscal year for all taxpayers, and limited to a maximum of $12,000 per fuel cell, in connection with an investment in commercial stationary hydrogen fuel cells in the state; and
- Capital costs, operation and maintenance costs, and research and development costs up to $6.5 million per state fiscal year for all taxpayers, in connection with an investment in the production, storage, and distribution of biodiesel and ethanol.
Unused credits may be carried over and used in tax years beginning January 1, 2007, and ending December 31, 2012.
Applications for these credits must be submitted to the Department of Environmental Protection, which will issue a certification to the applicant and to the Department of Revenue. Schedule V of Form F-1120, Florida Corporate Income/Franchise and Emergency Excise Tax Return, must be completed to claim the credit.
The sunset date for this credit is December 31, 2010.
Other Credits and Incentives
- Biodiesel Fuels Credit - Form 8864
- Credit for Alcohol Used as a Fuel - Form 6478
- Credit for Contributions to Selected Community Development Corporations - Form 8847
- Credit for Employee Social Security and Medicare Taxes Paid on Certain Employee Tips - Form 8846
- Credit for Employer-Provided Childcare Facilities and Services - Form 8882
- Credit for Small Employer Pension Startup Costs - Form 8881
- Disabled Access Credit - Form 8826
- Empowerment Zone and Renewal Community Employment Credit - Form 8844
- Enhanced Oil Recovery Credit - Form 8830
- Indian Employment Credit - Form 8845
- Low Sulfur Diesel Fuel Production Credit - Form 8896
- Low Income Housing Credit - Form 8586
- Orphan Drug Credit - Form 8820
- Other state credits
- Renewable Electricity Production Credit - Form 8835
- Welfare-To-Work Credit - Form 8861
Business Advisory Services
- Choice of entity and tax ramifications
- Tax due diligence for mergers and acquisitions
- Tax optimization of foreign ownership structure
- Assisting with calculation of the tax provision (FAS 109) and FAS 48
- Strategic consulting on the most tax-efficient method to acquire/dispose of businesses
- Monitoring and follow-up of time-sensitive IRS and state tax elections
- Advising clients on financing/leverage options (SBA, private placement, LOC's) and assisting with required paperwork and disclosures
- Incorporation services in all 50 states
- Off-shore and Tax Heaven Incorporation
- Completion of IRS form SS-4, Application for an Employer's Identification Number
- On-site notary public services at no additional charge for the firm's clients
Accounting & Bookkeeping Services
Business Start-up Consulting
- Prepare business plans and projections
- Set-up remote access to clients' systems for real-time analysis
- S-Corporation vs. C-Corporation vs. LLC
- Gathering information and filing initial federal and state registration forms
- On-site/off-site full-charge bookkeeping services
- Off-site bookkeeping services performed around clients' schedules
- Chart of accounts set-up
- Accounts payable/receivable
- Bank accounts reconciliations
- General ledger/sub-ledgers accounting
- On-site/off-site training
- Set-up of users' authorizations and passwords
- Initial clients' registration of payroll and unemployment accounts with federal and state tax authorities
- Set-up of new employees
- Filing of New Hire Report with states
- Identifying new employees as potentially qualifying for employment incentives
- Filing of quarterly and yearly federal and state payroll and unemployment tax returns
- Depositing payroll taxes through the IRS EFTPS