Do NOT Over-utilize Tax Credits!
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Utilizing state tax credits against income taxes can be complex, especially for pass-throughs such as S corporations and partnerships.
Many state tax credits (such as Georgia's Retraining Tax Credit, credit type code = 102) can be utilized up to 50% of the income tax liability per year and have a 10 year carry forward.
We have heard about tax software not correctly calculating the 50% utilization limit. For example, the CPA is not aware of the 50% limit, assumes the tax software is correct, and submits an amended return for a Retraining Tax Credit and $ refund for the client. DOR takes a long time to process the amended return and FINALLY replies that the amended return is not correct. You know the rest of the story!
If your clients are applying for tax credits, do not assume the tax software is correct. Double check the old fashioned way with a calculator -- your clients' refund checks will be appreciated sooner rather than later!
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Amend or Extend for Tax Credits?
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With the March 15 tax filing date approaching, you may be facing a dilemma for a pass-through entity, especially if your client wants to file shareholder individual returns by 4/15. What if they plan to submit tax credits but may not have the tax credit documents completed on time? Here are some options to consider: - Extend the state corporate income tax return (only need to extend state, not federal), then file individual returns on 4/15
- File the state corporate income tax return by 3/15 without tax credits, then amend the state corporate return for tax credits applied, distribute amended K-1s, and file individual tax returns on time by 4/15
Tax planning with your client really pays off in keeping your clients happy!
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About Us------------------------------------------------------------------------- Alpharesults has assembled a team with the specialized knowledge and approach required to obtain Georgia income tax credits. We are not a public accounting firm. Rather, our services complement those of public accounting firms and do not create conflicted loyalties, because our professionals do not perform attestation work or other external audit functions. We focus on small to medium-sized businesses and work exclusively in Georgia with a wide variety of in-state and out-of-state accounting firms. For more information on our services, follow this link. |
